What is the effect of capital repayment?

Hi all, 
Just sharing my understanding. Let me know if there’s any misconception.
For capital reduction, technically speaking, it should reduce the share price by similar amount. But there’s also a market perception issue…eg. future similar payout, improved dividend yield etc…the price correction may then be lesser.
With reduced capital base, ROE should improve (assuming returns stable n lower base). Other factors to consider could be the use of moderate borrowings or share buyback program.  
Higher ROE is always a good thing. 
For Uchi, perhaps other factors to consider are the following:
– Management seems to have no wish to grow the company further (else Money can be for acquisition)
– If trend continues (net cash n growing), likely candidate for privatisation.
– being a technology company, whether continuous investment is made to keep ahead of competition.
Regards
Chor Loo
 
 

Hi Chee Cong, 
 
As what Chor Loo had explained after the capital reduction most of the time the share price will reduce based on the dividend amount. 
 
The method is just a way of capital allocation which means that the management think it is better to return money back to shareholder then to keep it or like what Chor Loo had mentioned management may not wish to grow their business already. 

Hi Chee Cong, 
 
Just in case you are shareholder of Uchi, do take note that they have a customer concentration risk. You can find more detail in our article under point number 3.
 
https://fifthperson.com/2019-uchi-technologies-agm/