Tencent, Alibaba and more: These firms are primed for buybacks and present opportunities, says Jefferies

Published Wed, Nov 1 20238:51 PM EDT

Amala Balakrishner @in/amala-balakrishner @_amalabk

Buybacks are gathering steam in Asia — and that's creating opportunity for investors, according to investment bank Jefferies. Announcements of big buyback programs in the region have been rising since 2021, "with a long runway ahead" given the trend's nascence, the firm's analysts wrote in an Oct. 25 research note. In the past 12 months alone, MSCI Asia-Pacific (excluding Japan) companies did buybacks worth $49 billion, most of which are in China, they added. Companies repurchase, or buy back, shares in their own company for a number of reasons , such as increasing the value of their stock. And consistent buybacks provide a "sustained source of demand for equities while being a confidence-booster in terms of companies' belief in their own stock," the analysts wrote. Here are some names from Jefferies' screen of companies that are set to "initiate or continue significant buybacks." China tech players Jefferies screened for Asian companies with the potential to do buybacks using the following criteria, among others: Asia-Pacific ex-Japan firms with a market capitalization of over $2 billion. Price-to-earnings ratio of less than 20 times. High free cash-flow (FCF) yields of over 4%. Chinese internet tech giants Tencent , Alibaba , JD.com and Baidu appeared on the screen. "China internet is the standout sector, with PE (price-to-earnings) of 12.5x, the cheapest in the last 5 years (PE Reilly of 0%), while more than 90% of the companies are net cash and generating 7% FCF yield while paying out only about 1.8% yield including dividends and buybacks," Jefferies' analysts wrote. Other Chinese companies that showed up on the screen include telecommunications operator China United Network Communications , pharmaceuticals company Yunnan Baiyao Group, natural gas company KunLun Energy and e-commerce player Vipshop Holdings . Beyond the mainland, Taiwanese technology services provider Foxconn Technology also showed up. South Korea, Australia and beyond South Korea automobile manufacturer Kia, construction and engineering player Samsung C & T and LG Corp showed up on the screen. Other Asian stocks that made Jefferies' list included Singapore's transport operator ComfortDelGro and Indonesian mining player United Tractors. Australian stocks featured on Jefferies list included gaming content and tech firm Aristocrat Leisure and steel manufacturer BlueScope Steel . Financial companies Jefferies' screen also included financial companies in Asia Pacific that are potentially buying back their shares. Names that turned up included Thailand's Krung Thai Bank and the Philippines' Metrobank. Also on the list was Standard Chartered . Companies in this list have "significantly low" price-to-book ratio, while their earnings environment "is not too bad, both in terms of growth and revisions," the analysts said. — CNBC's Michael Bloom contributed to this report.