Thursday night, 20, was busy for Lojas Renner (LREN3): At the same time the company announced the appointment of Daniel Martins as its new chief financial officer, it reported that its board had approved a buyback program for up to 18 million shares.
Both news stories were well received by the market on Friday morning, 21. Around 1 pm, the company’s shares were up 2.26%, quoted at R$26.73.
The appointment of Daniel Martins, who has extensive experience in the consumer goods sector, follows the departure of Alvaro Fontes at the end of last year.
The buyback program, in turn, will be for up to 18 million shares, Equivalent to 1.82% of premium papers. Given the value of the shares at the end of Thursday, 21, the program could reach about R$500 million.
According to Lugas Rayner, the buyback program is an additional means of distributing cash to shareholders and “promoting value creation” for investors, as well as supplementing the number of shares needed to continue awarding the option-based purchase.
The announcement of the program, analyzed by Goldman Sachs, in a report distributed Friday, was somewhat unexpected, given the company’s recently announced plans.
In the second half of last year, the company raised R$4 billion through a subsequent stock offering (follow-up). At the time, the company indicated it could use the money for acquisitions. However, over time, the company’s management has begun to stress the need to assess whether acquisitions are really the best course of action, or whether organic growth projects should be prioritized.
The buyback program, in Goldman’s view, is positive. Its 18-month duration and size allow the company to maintain flexibility to take advantage of potential merger and acquisition opportunities, but, from the bank’s perspective, these are signs that organic growth remains a priority and that the company will maintain responsibility for allocating capital.
Additionally, Goldman notes that the board’s decision to opt for buyback shows the company prioritizes returning value to shareholders.
Genial Investimentos also sees the retailer’s ads with good eyes. “In addition to the company showing an interest in generating shareholder value, it now has a seasoned financial expert on its executive team who can make new ventures healthy,” analysts said in comments to the market on Friday.
Goldman is maintaining its buy recommendation for the stock, with a 12-month target price of R$37, up 41.5% from Thursday’s closing price.
Optimism appears to be widespread: according to data collected by Refinitiv and made available on the platform Trade MapOf the 14 analysis houses that were consulted, 12 recommend the stock as a buy, while only one recommend a sell and the rest have a neutral rating. The average target price for institutions is R$41, an increase of 56.8% over current levels.
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