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 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 – though it must be noted that there is no basis for that as insiders might be selling for…
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 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 – though it must be noted that 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.
Overseas-Chinese Banking Corporation (SGX: O39)
Founded in 1932, OCBC was formed from the merger of three banks that predominantly served Hokkien Chinese people in a bid to compete against their larger rivals: Chinese Commercial Bank; Ho Hong Bank and; the Oversea-Chinese Bank.
Today, OCBC is Singapore’s second largest bank by total assets and has over 530 branches in 15 countries and territories, including Singapore, Indonesia, Hong Kong, China, the UK, USA, Japan and Australia.
Starting from 1 April 2014, OCBC has been actively buying back its shares on a daily basis. 800,000 shares have been re-purchased in the public stock market, at prices ranging from S$9.56 to S$9.71 each. The increase in the price of its buy-backs is partly a result of OCBC’s share price moving up steadily over the past few days. In any case, the cumulative number of shares purchased to date stands at 11.32 million, equivalent to 0.339% of its share capital.
OCBC last traded at S$9.71 on Friday and is valued at 1.4 times its book value while offering an annualized dividend yield of 3.5%.
Zhongmin Baihui Retail Group (SGX: 5SR)
Zhongmin Baihui Retail Group’s main business activities revolve around the ownership, operation and management of department stores in China under the name “中闽百汇” (pronounced “Zhong Min Bai Hui”).
From a start of one store in 1997, the company has since expanded its footprint to operate three self-owned stores and six managed stores in the Fujian and Jiangsu provinces in China. The bulk of Zhongmin Baihui’s revenue is derived from four sources: direct sales; commission from concessionaire sales; rental income; and income from managed rental.
On 1 April, Mr. Chen Kaitong, the company’s CEO, acquired 1 million shares at a price of S$1.75 each for a total consideration of S$1,750,000. After the purchase, his direct interest in the firm rose from 20.61% to 21.12%.
Zhongmin Baihui Retail last changed hands at S$1.76 on Friday and commands a lofty premium with a trailing price-to-earnings ratio of 174.
Being a company with a pure exposure to the retail industry in China, it could be labeled as an S-chip or China-play. However, it’s worth noting that the company is majority-owned by Singaporeans given how Mr Lee Swee Keng, who’s the company’s single largest shareholder and its executive chairman, is a Singaporean.
Mermaid Maritime Public Company (SGX: DU4)
Mermaid Maritime is a leading provider of drilling and sub-sea engineering services for the oil and gas industry in South East Asia. It provides drilling services through its majority-owned subsidiary, Mermaid Drilling Ltd, and sub-sea engineering services through its wholly owned subsidiary, Mermaid Offshore Services Ltd. For the 2013 financial year, subsea services contributed 85.9% of Mermaid Maritime’s total revenue while offshore drilling services filled up the rest.
Founded by Dutch mariners in 1983, the group has since emerged to provide a full range of subsea services and tender rig drilling services for the offshore oil and gas industry. It is recognized by the industry for its high quality services and has developed a strong blue chip customer base that includes some of the world’s largest oil and gas-related companies.
On 28 March, Dr. Jan Skorupa, an independent director of the firm, purchased 80,000 shares at the price of S$0.45 each. This trade marks Skorupa’s first acquisition of shares in the firm. Mermaid Maritime closed at S$0.505 last Friday and it sells for 16 times trailing earnings. The company’s shares also offer an annualized dividend yield of 1.3%.
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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.