CLSA - downgrade to A$4.20 TP, page-24

A share buy back is just what it says. The company goes into the market and buys shares, and then cancels those shares. The effect is that all remaining shares have a higher proportion of ownership. example. A company with a market cap of A$1mln with 1 million shares. Each share 'owns' 1 millionth of the company. If a company buys back 200,000 shares and cancels them, then the company still has a A$1mln market cap but each share 'owns' 1 800th of the company. This is a good idea if the company is sitting on excess cash with no use for it. If companies sit on excessive piles of cash, then returns are diluted (as the 'asset' is not producing significant returns or generating growth). It is also more beneficial than returns of capital to shareholders, as that is a one-off benefit, as opposed to increasing worth of each share by canceling bought back ones.

I hope that makes sense.