New Hope share price jumps on $300m buyback plans

The New Hope Corporation Limited (ASX: NHC) share price has avoided the market selloff on Thursday.

In afternoon trade, the coal miner’s shares are up over 6% to $6.10.

This means the New Hope share price is now up almost 170% since the start of the year.

Why is the New Hope share price racing higher?

Investors have been scrambling to buy the company’s shares today after it announced an on-market share buyback.

Incredibly, despite rising by almost 170% in 2022, the company’s board and management teams believe the New Hope share price still “does not accurately reflect the underlying value of the Company’s assets.”

In light of this and after taking into account the company’s future expected operating and cash flow requirements, the board has unanimously approved an on-market buyback of ordinary shares for up to $300 million. This buyback is scheduled to commence on or around 17 November 2022 and be completed within 12 months.

New Hope believes the buyback represents an opportunity to enhance the value of the remaining shares on issue, as well as provide an opportunity to improve the liquidity of the stock.

New Hope chair, Robert Millner, commented:

The Company expects its strong cash generation to continue as demand for high energy and lower emission thermal coal outstrips ongoing tight supply. The Board has carefully considered how to return surplus capital to shareholders, in addition to the record fully franked dividends declared at the full year results.

We believe that the Buy-Back will benefit all our shareholders as it will reduce the number of shares on issue, thereby supporting the Company’s return on equity, earnings per share and dividend per share, for all shareholders who continue to hold shares in New Hope Corporation.

What’s next?

New Hope may not stop at this buyback when it comes to capital management.

The release notes that the company will continue to assess various options to return capital to shareholders.

Though, the exact nature, amount, and timing of any further capital returns beyond this buyback will depend upon market conditions and its capital outlook.

The post New Hope share price jumps on $300m buyback plans appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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