The McMillan Shakespeare Group (MMS:ASX) is a trusted provider of salary packaging, novated leasing, disability plan management and support co-ordination, asset management and related financial products and services.
Current advice: Closed.
Latest recommendation: 26 October 2022, 10:15am
MMS has completed its off-market buyback, with the price holding up enough during the pricing period to ensure a good result for members. The market price for the buyback was $13.56 and, with the full discount of 14% applied, the buyback price was $11.66. With $0.99 only of capital, the fully franked dividend component amounts to $10.67 which will have $4.57 of franking credits attached.
We have also had confirmation that shareholders owning 207 shares or less will not face any scale-back, so we will receive gross proceeds of $16.23 for all shares tendered. The trading range of the stock on the day of our recommendation was $13.02-$14.66, so the gross profit will be between 10.7% and 24.7% depending on one’s entry price. Payment is due to be made on 1 November.
Update: 23 September 2022, 10:00am
The tender period for MMS’ off-market buyback has now opened, and while we have until 21 October to act, there is no reason to hold off. To submit a tender, one can visit www.mmsbuyback.com.au. Once you have entered the main buyback page, click on ‘Apply’ at the top of the page which will take you through to where you need to enter your personal shareholder details such as holder identification number (HIN).
Once you have accessed your holding, we recommend tendering your entire parcel of shares (207 shares per our recommendation) at the ‘FINAL PRICE TENDER’. Do not select a minimum price. Once your tender has been submitted, you should receive an email confirmation. Additionally, your shares should no longer be visible or tradable in your CHESS-sponsored broking account.
We will provide one further reminder closer to the deadline.
Update: 30 August 2022, 12:45pm
Further to yesterday’s buy recommendation, we wanted to clarify some confusion for members. We mentioned the price of $13.15 in our article which was simply the price at the time of writing, but the stock rallied throughout the day and is today trading at $14.50. Importantly, our recommendation was to buy MMS ‘at current levels’ and it is important to note why. All things being equal, it is better for us if the MMS share price appreciates as the price that shares will be bought back are determined using a volume weighted average price during the last week of the tender period. As the capital component of $0.99 is fixed, a higher share price means a higher fully franked dividend as a percentage of total proceeds, so buying at $14.50 (and assuming the share price doesn’t move) will yield a slightly higher gross profit than the numbers used in yesterday’s buy recommendation.
The risk in buying higher, of course, is if the stock returns to lower levels and that part of the strong trading is because of the off-market buyback, but it’s impossible to know why the stock has rallied so strongly. The full year results were strong, and just as we don’t factor in potential upside in our buy assessment, assuming that the stock falls is speculation only, and therefore doesn’t impact our willingness to buy. Accordingly, we have attached yesterday’s buy advice once again.
Therefore, for members able to take advantage of the franking credits, we recommend buying 207 shares in MMS at current levels by the close of trade on Friday to take part in the off-market buyback.
Update: 29 August 2022, 11:30am
MMS this morning announced an off-market buyback of 10% of the shares on issue. Off-market buybacks have typically been very profitable exercises for those members able to take advantage of franking credits, and the MMS one looks like it should be the same with an expected gross return of almost 20%. This assumes the share price doesn’t move which isn’t going to happen, but it means we have a big margin of error if the MMS share price heads south and upside if MMS trades higher by the close of the buyback period.
There are a few key details to consider before buying MMS. Firstly, the company has allowed anyone buying the stock before the close of trade on Friday to be eligible for the buyback. MMS has also announced that $0.99 of the buyback will be capital, meaning over 90% (at current levels and assuming the maximum discount of 14%) will be fully franked dividend. Finally, there is an allowance for priority allocation (166 shares) and small shareholders (anyone left with 41 shares or less), meaning that we can be assured of share parcels of 207 shares or less being bought back in their entirety.
If one was to buy 207 shares in MMS at the current price of $13.15 (and assuming the price didn’t move before the pricing period and that the shares were bought back at the full discount of 14%), the gross return would be $0.99 in capital and $10.32 in fully franked dividends (plus the $4.42 in attached franking credits), or $15.73 in total which is a premium of 19.6% to $13.15.
Therefore, for members able to take advantage of the franking credits, we recommend buying 207 shares in MMS at current levels by the close of trade on Friday to take part in the off-market buyback.
