Dexus has announced a new on-market buyback of up to 10% of its securities, aiming to address the disconnect between its market valuation and underlying asset values while maintaining capital discipline.
- On-market buyback of up to 10% of securities over 12 months
- Buyback funded through existing facilities and working capital
- Management cites valuation disconnect as key driver
- Part of broader capital management alongside asset sales
- Dexus manages $51.5 billion in Australasian real estate and infrastructure
Dexus Initiates Strategic Buyback
Dexus (ASX, DXS), a leading Australasian real asset group, has announced plans to repurchase up to 10% of its securities on-market over the coming year. This move is designed to address what management describes as a "sustained disconnect" between the company’s equity market valuation and the intrinsic value of its underlying assets and businesses.
Ross Du Vernet, Dexus Group CEO and Managing Director, emphasised that the buyback will be executed with balance sheet discipline in mind, running alongside ongoing asset sales and other strategic initiatives. The company intends to fund the buyback through existing financial facilities and working capital, signalling confidence in its current liquidity position.
Capital Management in Focus
This buyback forms part of Dexus’s active capital management strategy, reflecting a broader trend among real estate investment trusts to optimise shareholder returns amid fluctuating market valuations. By reducing the number of securities on issue, Dexus aims to enhance earnings per security and potentially narrow the gap between market price and net asset value.
With a portfolio valued at $51.5 billion, including a $15.3 billion listed portfolio spanning office, industrial, retail, healthcare, infrastructure, and alternatives, Dexus is well positioned to undertake such a program without compromising its operational capabilities or development pipeline.
Market Implications and Next Steps
Investors will be watching closely to see how the buyback unfolds over the next 12 months, particularly in relation to the pace of asset sales and other capital initiatives. The announcement underscores management’s belief that the current share price does not fully reflect the value embedded in Dexus’s diversified real estate holdings.
While the buyback is a positive signal of confidence, questions remain about the timing and scale of repurchases, as well as the potential impact on liquidity and future capital needs. Market participants will also be keen to assess how this strategy fits within the company’s longer-term growth and sustainability objectives.
Bottom Line?
Dexus’s buyback signals confidence but leaves investors eager for clarity on execution and impact.
Questions in the middle?
- At what pace will Dexus execute the buyback amid ongoing asset sales?
- How will the buyback affect Dexus’s liquidity and capital flexibility?
- Will the buyback narrow the valuation gap as intended over the next year?