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 two weeks.
1. Fu Yu Corporation (SGX: F13)
Fu Yu Corporation was established in 1978 as a small moulding and tooling fabrication factory. Today, it has grown to become a major manufacturer and supplier of high-precision injection moulds and plastic parts in Asia. Currently, it operates 12 plants in Singapore, Malaysia and China and serves a wide array of customers which include companies from the automotive, medical, electronics and electrical appliance sectors.
On 23 May and 12 June 2014, Mr. Ng Hock Ching, an executive director of the firm, bought back 6 million and 3.35 million shares respectively via off-market transactions at the price of S$0.09 and S$0.095 each. As a result of these purchases, Ng’s stake in the firm had increased from 12.80% to 14.07%.
Fu Yu Corporation last traded at S$0.104 on Friday with a P/E ratio of 17. The firm does not pay a dividend.
2. Gallant Venture (SGX: 5IG)
Gallant Venture is a commercial development and management company focused on the Indonesian islands of Batam and Bintan. There are four major business segments within the company, namely Industrial Parks, Utilities, Resort Operations and Property Development. Last May, the company also expanded into automotive retailing through a S$988 million investment into Indonesia-listed automotive retailer PT Indomobil Sukses Internasional (IMAS). Gallant Venture currently owns 52.35% of IMAS.
On 12 June 2014, Lim Hock San, non-executive chairman of the company, had sold 1.7 million shares at $0.355 each on the open market. With that, he is left with 1.714 million shares in Gallant Venture, equivalent to having a 0.036% stake in the company.
Gallant Venture last changed hands at S$0.34 on Friday, marginally down from Lim’s sale price of $0.335. The financial performance of Gallant Venture has been something of a roller-coaster over the past few quarters and the company’s being valued at 34 times trailing earnings. The firm does not pay a dividend..
3. United Envirotech (SGX: U19)
United Envirotech provides membrane-based water and wastewater treatment and reclamation solutions for chemical plants, petrochemical facilities and industrial parks that are based in China. Its membrane systems have also been used in other areas like pharmaceutical, food and beverage, and textile and dye staff companies.
Besides undertaking turn key projects in its capacity as engineering, procurement, and construction contractor, or as a membrane system specialist, United Envirotech also provides engineering and maintenance services which involve the design, fabrication, installation, and commissioning of membrane-based water and wastewater treatment systems.
On 11 June, Mr. Tay Beng Chuan, an independent director of the firm, exercised his employee share options to acquire 200,000 shares at an estimated price of S$0.25 each. As such, his direct stake in the firm increased from 0.06% to 0.08%.
United Envirotech closed at S$1.47 on Friday and sells for a lofty 44 times trailing earnings. It offers a low dividend yield of only 0.20%.
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.
The Motley Fool's purpose is to help the world invest, better. Like us on Facebook to keep up-to-date with our latest news and articles.
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.