The Samolet development group is going to buy back its shares before the end of the year

Samolet Development Group will hold a buyback in the amount of up to 10 billion rubles. Share buybacks are an additional way to pay shareholders, but analysts say the developer’s example is unlikely to be contagious. In the context of a total restructuring of business, the loss of Western markets and the complexity of logistics, few companies can afford to share liquidity with shareholders. Most, on the contrary, refuse even dividends.

The board of directors of the Samolet group instructed the company’s management to buy back its own shares (buyback) in the amount of up to 10 billion rubles. until the end of the year. The company explained the decision by the fact that “the fair value of net assets is five times higher than the current capitalization, and the dynamics of the share price does not reflect the multiple growth of the business over the past few years.”

The subsidiary company will redeem the paper in order to “use it for general corporate purposes.” According to the results of exchange trading on May 26, the capitalization of Samolet was estimated at 168.5 billion rubles. Thus, the buyback volume will be 6% of capitalization as of this date.

As a result of trading on May 29, the company’s shares added more than 9% in price, and the capitalization exceeded 184.5 billion rubles.

The use of buyback has been widespread in the US stock market, experts say. This has become a common practice due to the extremely loose monetary policy – the money paid out was replaced by practically free loans, said Dmitry Alexandrov, managing director of Ivolga Capital. In Russia, he adds, the cost of credit resources remains elevated, especially for second-tier companies, so that the practice of replacing capital with debt is available only to the largest companies with high credit ratings, like MTS or, at one time, Detsky Mir. This year Bank Saint-Petersburg continued buying back its own shares.

Buyback on the Russian market was used by issuers with outstripping growth in the scale of operations and attractive returns for investors, adds Anna Avakimyan, chief analyst at Regblok. Shares of the developer “Airplane” just belong to this category, she clarifies. Samolet considers its shares to be undervalued given the rapid growth of the business, so it sees the purchase of securities as a good investment, says Arikacapital strategist Sergei Suverov.

Share buybacks are also a way to share profits with shareholders, notes Mr. Alexandrov. If the purchased securities are redeemed, the value of the remaining ones will also increase. However, the dividend culture is more developed in the Russian market than the practice of share repurchases, Mr. Suverov clarifies.

To redeem shares, you need free cash. According to Dmitry Alexandrov, according to IFRS reporting, at the end of 2022, the balances on the accounts and short-term deposits of Samolet were estimated at 9.8 billion rubles.

In addition, the company “works very professionally in the capital markets, and bond borrowings are also available for it,” the expert notes.

Meanwhile, most Russian companies this year “have an understanding of the increased uncertainty of business, so not everyone even pays dividends,” says Sergey Suverov (only on May 29 it became known that they plan to refuse dividends this year, for example, VTB, Detsky Mir ”, MMK, NLMK, Vimpelcom and a number of others). In the context of a total restructuring of business, the loss of Western markets and the complexity of logistics, Dmitry Alexandrov emphasizes, “few companies can afford to spend liquidity on payments to shareholders, so the example of Samolet is unlikely to become contagious.”

Ksenia Kulikova