One of the more commonly-used strategies by investors is to follow insider transactions. Some might even assume that since insiders are “in the know”, they might be better equipped to predict the share price of a company. Consistent insider purchases may indicate an undervalued share price. On the other hand, there might yet be others who would turn the argument around and say that if insiders are selling, then bad news is likely to be around the corner – although there is no basis for that as insiders might be selling for their own personal reasons. With…
One of the more commonly-used strategies by investors is to follow insider transactions. Some might even assume that since insiders are “in the know”, they might be better equipped to predict the share price of a company.
Consistent insider purchases may indicate an undervalued share price. On the other hand, there might yet be others who would turn the argument around and say that if insiders are selling, then bad news is likely to be around the corner – although there is no basis for that as insiders might be selling for their own personal reasons.
With that in mind, let’s take a look at three companies with insider activity over the past week.
Serial System (SGX: S69)
Established in 1988, Serial System began life as a distributor of electrical and electronics components. Over the years, Serial has formed strong partnerships with its customers by planting offices close to them. Doing so also enabled Serial System to gain quick insights into changing trends so that its product development cycle could be aligned closer to its customers’ needs.
Today, Serial System has a wide global presence, serving 6,000 customers from various industries across Asia in countries such as China, India, Indonesia, Korea, Thailand and Vietnam.
On several occasions between 20 Feb 2014 and 3 March 2014, Mr. Goh Bak Heng, Chief Executive Officer of Serial System, bought a total of 2.7 million units at prices between S$0.133 and S$0.134 per unit. Through these transactions, his direct interest in the company now stands at 37.76%.
Serial System last traded at S$0.135 yesterday, slightly higher than when its shares were recently bought Goh. Shares of the company are valued at 8.9 times trailing earnings at that price and offer an annualized distribution yield of 3.9%. In Serial System’s latest earnings release, its management team had addressed the issue of the company’s thin net profit margin of only 1.4% and highlighted the steps they are taking to improve profit margins.
Keong Hong Holdings Limited (SGX: 5TT)
Keong Hong began life in 1983 and is now a provider of construction services to both private and public sectors for residential, commercial, industrial and institutional projects. Its business segments comprise of conventional contracts, additions and alterations (“A&A”) and Design and Build (“D&B”) projects in Singapore and the Maldives.
In 2012, Keong Hong ventured into property development, taking advantage of its competencies in the construction business and its experience in working with established property developers and owners.
On 28 Feb and 3 March 2014, the company acquired 72,000 and 428,000 shares respectively, at a price of S$0.57 per share. This purchase of a total of 500,000 shares is the first after the company had obtained its share buy-back mandate. This particular buy-back amounts to 0.32% of the outstanding issued share capital of Keong Hong Holdings and increases the amount of its treasury shares to a total of 4.5 million shares.
Keong Hong Holdings last changed hands at S$0.58 on Monday and trades at a relatively low Price-to-Earnings ratio of 4.23. With an interim cash dividend of S$0.02 per share and assuming it will continue to pay out an unchanged final dividend of S$0.005 per share based on last year’s final dividend, its dividend yield stands at 4.31%.
UOB-Kay Hian Holdings (SGX: U10)
UOB-Kay Hian Holdings was formed when Kay Hian Holdings and UOB Securities merged in 2000. It is currently the largest publicly-listed securities company in Singapore where it deals with securities trading and other investments for Asian financial markets.
Mr. Wee Ee Chao, managing director of UOB Kay Hian and son of billionaire banker Wee Cho Yaw, started his buying spree right after the company’s results were released on 26 February 2014. On a daily basis from 28 Feb to 7 March, Wee Ee CHao had been steadily buying shares through UIP Holdings and UOB Kay Hian Pte Ltd-KIP Inc on the open market. All told, he now owns a deemed interest of 23.25% in UOB-Kay Hian Holdings through the other two firms.
UOB Kay Hian closed at S$1.66 yesterday and is selling for 12.8 times trailing earnings. It offers an annualized dividend yield of 3.9%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.