I do not think a share buyback is appropriate for this company...

I do not think a share buyback is appropriate for this company in present conditions.

CSR is viewed by many investors as an income stock. Its investment appeal is that it pays regular and rising dividends over time.

Presently, I believe the stock price is undervalued. For example, the current market price is below the Net Tangible Asset (NTA) backing per share of $2.32 (as at 30/9/11). The effects of ongoing short-selling are exacerbating price falls.

The intention of any share buyback, where a company uses excess cash to buy its shares, is to reduce the number of shares on issue, to raise Earnings per Share (EPS) . It is further hoped this will lead to an increase in the share price.

However, the problems with a buyback now are:-

1.This assumes that overall company earnings will grow or at least be maintained. In the present adverse operating environment, if future profit deteriorates (eg like for Viridian), there may be no rise in EPS.

2.Even if EPS does rise, in a falling bear market like we have, the share price is still likely to decline.

3.A share buyback would likely disadvantage smaller shareholders who opt to sell out at a low price (if one believes the stock is undervalued and likely to rise later).

If the company cannot apply surplus cash for bolt-on acquisitions that increase profitability, then it should consider distributing the idle cash by way of special dividends or increased ordinary dividends to shareholders who can decide what they do with the proceeds.

In summary. Payment of a dividend gives all shareholders an immediate cash benefit; whereas a share buyback provides only continuing shareholders with a possible deferred benefit (which may not occur).