Capital Management Initiatives - Aussie Stock Forums

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  1. #1

    Default Capital Management Initiatives

    Can some one please list the different "Capital Management Initiatives" that a company has available to it.

    I gather share buy-backs - either on market or off market are examples and special dividends are others. But would keeping money to fund future acquisitions or growth be considered to be "capital management"? Are there any other initiatives?

    What has made me wonder is that I was reading an analyst reports on Brambles which had been a bit negative as it commented that Brambles's last report hadn't mentioned any new Capital Management Initiatives. (It is currently doing an on market share buy back)

    What else could it do?

    Are there any initiatives which are better than others (as far as the share-holder is concerned)?

    Which are best for the company?

    I assume they got into this position when they divested themselves of part of the company (Cleanaway) and ended up with a stack of cash. Presumably this would make them vulnerable to take-over by private equity or someone else. But what other options do they have once they acquire all this cash?

    Brambles has been actively buying back shares on market since late last year and had bought back nearly 9million shares at the last report (mind you this is still a pretty small percent of the total outstanding shares.) The share price went up and down in a narrow range ever since they started doing the buyback (except for the last week when it took a dive like the rest of the ASX!)

    Currently a couple of other companies are doing share buy backs, MIG, AXA, NWS.

    Are they a good thing or just an easy option?

  2. #2

    Default Re: Capital Management Initiatives

    I think companies buying their own shares is a good thing when capital expenditure on new projects will not be Earnings per share accretive in the said year. In this case you are better to either return some money by way of a special dividend or buying back shares in the company. However be aware that big share buy backs have the effect of preserving earnings per share in years where net profit was lower than expected and this can be used as a method to prop up earnings per share and hide the fact that the company may have reached maturity and earnings growth will no longer be in the double digits. I like companies who state in their share reports 'oh by the way although EPS is stable for the period it was due to us buying back our shares'. I hate companies who try to hide that fact.

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