Aesthetic Medical International Holdings Group Ltd [NASDAQ:AIH] has been quite strongly over the last one month. Its momentum is largely driven by the company’s recent announcement that it would kick start a share repurchase program.
On October 13th, the company announced that its board had approve a share repurchase program that would see the company repurchase $6 million of its American shares and that the program would last until October 12th 2021.
The company noted that during the share repurchase program, all key factors including all applicable laws, trading price, volum3s, and overall market conditions would be put into consideration when carrying out the repurchase program. The company also noted that the repurchase would be done in the open market at existing prices, and that this would be done in cognizance of market conditions. The company further announced that it would use its current cash reserves to fund the program.
The repurchase program is a big deal for the company as it presents a massive opportunity for the company to grow in value in the near-term. That’s because it will create demand for the stock and as a consequence, drive up its price momentum.
To understand, one needs to look at the equity markets after the 2008 crisis. The markets rallied not so much due to individual investors buying stocks, but due to companies buying back their own stock.
Companies like Apple led the way on this front and achieved very high valuations over the last few years. The demand pressure that the process generates triggers a massive increase in value that is almost always guaranteed. This makes AIH a low risk high return stock to watch in 2021all the way to the end of 2021.
The upside momentum is also likely to be sustained by investors jumping in to take advantage of the massive gains that could accrue of holding this stock all through the buyback period.
Besides the buyback, this stock stands to gain from the improved macro-economic trends in China. Recent Chinese data shows that the economy grew by 4.9% in the last quarter. With the virus under control in the country, the aesthetic medical devices market is likely to pick up again.
This is likely to positively impact on the company’s revenues that took a hit in recent quarters and as a result, create a positive price momentum in the stock. It is definitely one of the best stocks to keep an eye on in the near-term.