NYSE-listed China Yuchai, a subsidiary of Singapore Exchange S68 (SGX)-listed Hong Leong Asia H22 , has approved a share buyback plan.
On June 7, the company announced that its board of directors has approved the plan where the company may repurchase its ordinary shares of up to US$40 million ($54.0 million) in value or up to 4 million shares, whichever occurs earlier.
Under the share buyback plan, China Yuchai may buy back its shares from time to time at prevailing market prices in private negotiated transactions or other means.
The company says it plans to fund the share buyback plan from its operating cash flow and its existing cash balance.
The plan may be reviewed from time to time. It may also be suspended or discontinued at any time, says the company.
The shares bought under the buyback plan will be held as treasury shares.
See also: UBS pledges US$2 billion of share buybacks over next two years
In a separate announcement made on the same day, China Yuchai said its board has approved two equity incentive plans.
The plans are to be implemented by China Yuchai’s subsidiaries, Guangxi Yuchai Machinery Company (GYMCL) and Guangxi Yuchai Marine and Genset Power (MGP) in respect of the equity interests in MGP. GYMCL is 76.41% owned by China Yuchai while MGP is wholly-owned by the company.
Under the equity plans, MGP’s registered capital will be increased to RMB28 million ($5.2 million), representing 6.54% of its enlarged equity interest.
See also: CDL steps up share buybacks, spends nearly $13 million over three trading days
The participants of the plans, who are selected directors, officers and other employees of GYMCL, will contribute a total amount of RMB82.88 million for the subscription of the enlarged equity interest in MGP at RMB2.96 per RMB1 registered capital. This will be done through separate partnership vehicles where the participants will acquire their respective portions indirectly. The participants will hold direct interests in the same partnership vehicles.
The equity plans are subject to and will take effect once GYMCL’s shareholders give the green light at its shareholders’ meeting to be held on June 20.
The equity plan allows the participants, whose contributions are key to GYMCL’s long-term growth, to acquire a stake in a key entity of the GYMCL group, says China Yuchai.
Under the international financial reporting standards (IFRS), the company is expected to register a share-based expense to its profit and loss account. The charge will be determined based on, among other things, a valuation of MGP.
China Yuchai says it expects to adopt a valuation of MGP of RMB2.48 billion, which is a fair value as at Dec 31, 2023.
After applying the Finnerty model of valuation, the fair value of the MGP interest is estimated to be around RMB131.69 million. The share-based expense is estimated at RMB48.81 million, which is to be amortised over six years in view of the relevant lock-up restrictions imposed on the participants.
As at 11.53am (US time), shares in China Yuchai are trading 61 US cents higher or 7.26% up at US$9.01. Shares in Hong Leong Asia closed 0.5 cents lower or 0.82% down at 60.5 cents on June 7.
