3 Companies with Insider Activity

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.

In addition, while substantial shareholders are often not involved with running the company and are thus not strictly classified as ‘insiders’, their moves with a company’s shares might be worth noting too for the simple reason that substantial shareholders have a big stake in a company and would likely have done the requisite homework.

With that in mind, let’s take a look at three companies with substantial shareholder activity over the past two weeks.

Hankore Environment (SGX: B22)

Hankore Environment helps take care of the environment with its water supply, waste water treatment, and treated water recycling businesses. At present, HanKore has interests in 17 large scale municipal water/wastewater projects in a number of Chinese cities that include Beijing, Jiangsu, Shandong, Shaanxi and Henan. After a change at the helm of HanKore Environment in 2011, the firm’s fortunes have changed after years of making losses – it has posted two consecutive years of profit and clinched numerous awards as well.

On 12 May 2014, Mr Wang Yu Huei, a substantial owner of the firm, acquired 51.02 million shares for a total of S$4.9 million via the open market. The acquisition seems to be an opportunistic purchase that came after a 22% fall in Hankore’s share price on 9 May. The company’s shares had tanked following a report from the Hong Kong-based newspaper Oriental Daily which revealed that China Everbright, a company that’s partnering closely with Hankore in a number of business deals, was being investigated for corruption.

In any case, the transaction increased Wang’s stake in the company from 10.01% to 11.02%. Shares of Hankore last traded at S$0.093 with no P/E ratio to speak off as it has accumulated huge losses over the last 12 months.

Metro Holdings (SGX: M01)

Metro Holdings has two core business segments: Property investment and development; and Retail. Under the latter, Metro Holdings operates a chain of four Metro department stores in Singapore with one of them actually located in the swanky and upscale Paragon Shopping Centre. Within its retail activities, Metro also owns a chain of specialty and departmental stores in Indonesia. As for the company’s property segment, its portfolio includes several prime retail and office properties in China and Penang, Malaysia.

On 5 May, Ngee Ann Development Private Limited scooped up 460,000 shares at an average price of S$0.92 each via the open market. After the purchase, the shareholder’s stake in the firm rose slightly from 9.97% to 10.02%. On a side note, Ngee Ann Development Private Limited is actually controlled by Takashimaya Co., Ltd, which makes the latter a substantial shareholder in Metro Holdings as well. Metro Holdings last changed hands at S$0.925 and commands a P/E ratio of 9.85. It also sports a distribution yield of 2.2%.

Lippo Malls Retail Trust (SGX: D5IU)

Lippo Malls retail trust is the only real estate investment trust listed in Singapore that focuses on retail malls in Indonesia. It’s linked to the sprawling Indonesian conglomerate, the Lippo Group, and currently owns 16 malls that are mainly located in the Indonesian islands of Java and Sumatra.

On 9 May, APG Asset Management N.V., a substantial shareholder of the company, sold a small stake in the trust to bring down its stake from 6.02% to 5.96%. Lippo Malls Trust currently sells for 0.9 times its net ass value at its current price of S$0.405. It also has a relatively lower gearing ratio of 26.7% while offering a distribution yield of 6.7%.

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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.