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. See Hup Seng (SGX: 566)
See Hup Seng is a leading corrosion prevention specialist in Singapore that’s primarily engaged in the business of grit blasting, painting, supply of equipment and machinery, and rental of equipment. Over the years, the company has enhanced its core competencies and moved up the value chain to establish a strong niche in specialized tank coating services and large-scale plant operations.
On 24 June 2014, Dr. Lee Kuo Chuen, an independent director of the firm, sold 598,000 shares at S$0.29 each in the open market. He received a total sum of S$173,420 from the sale and as a result, his interest in the firm had dropped from 0.1% to zero.
See Hup Seng last traded at S$0.295 last Friday, a tad higher than the disposal price of S$0.29. It has a price/earnings (PE) ratio of 13.2 and offers a trailing dividend yield of 3.2%.
2. QAF (SGX: Q01)
While many may not have heard of the company called QAF, many would have consumed its products – Gardenia Bread is one such example. QAF is a leading food-related company that’s been around since the 1950s, operating across the Asia-Pacific region through 3 business segments – Bakery, Primary Production, and Trading & Logistics.
Under the Bakery division, it manufactures and distributes bakery products under the 2 brands – Gardenia and Bonjour. QAF is also the largest producer and exporter of pork in Australia, in addition to being a producer of stock feed in the country. Lastly, the Trading & Logistics segment is where the company earns its keep with house brand names such as Cowhead (milk and dairy products) and Farmland (processed meat and foodstuff).
On 24 June 2014, Mr. Tan Kong King, QAF’s group managing director, sold off 191,398 shares at S$0.836 each on the open market. Prior to this, he received the same amount of shares via scrip dividends in lieu of a cash dividend of S$0.04 per share. The scrip dividend was awarded at S$0.795; the calculated profits for Tan thus comes out to S$7,847.32.
Interestingly, 3 days later, KMP Investments Pte Ltd acquired a significant 10% stake in the company by buying 55.23 million shares at an average price of S$0.84 per share. With that, it has become a substantial shareholder of the firm when it held no shares prior to this transaction.
QAF last changed hands at S$0.84 last Friday. Its trailing PE ratio stands at 14.7 and the company sports a handsome 6.0% dividend yield.
3. Hu An Cable Holdings (SGX: KI3)
Hu An Cable is an integrated manufacturer of wires and cables in China and it supports many industries with its product suite which ranges from the low- to high-end. The company’s products are used in power generation plants, power transmission and distribution grids, coal mining, ship-building, transportation networks, real estate projects, and electrical equipment and devices for industrial and household uses.
According to the company’s website, it is among the top 10 wire and cable manufacturers in China. It also boasts state-owned enterprises such as State Grid Corporation of China, China Petroleum & Chemical Corporation, and China Railway Group as its clients.
On 19 June 2014, Mr. Dai Zhi Xiang, Hu An Cable’s executive chairman and chief executive, snapped up 6.1 million shares of his company at an average price of S$0.082 each. This transaction boosted his stake in the company to 17.61% from 17.01%.
Interestingly, Hu An seems to want to reinforce the belief that its future prospects are bright by issuing a press release after Dai bought shares; it’s not generally the case where companies issue press releases when insiders buy or sell shares.
Hu An Cable closed at S$0.076 on Friday and it sells for a modest 4.67 times earnings. There’s no dividend yield to speak of as the company has not given out a dividend in its last two financial years.
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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.