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.
In addition, while substantial shareholders (shareholders who control 5% or more of a company) 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 both insider and substantial shareholder activity over the past two weeks.
1. Religare Health Trust (SGX: RF1U)
Religare Health Trust (or RHT in short) is the first business trust to be listed in Singapore with an initial portfolio comprising of healthcare assets in India. Its investment mandate is focused on medical and healthcare assets and services in Asia, Australasia, and the emerging markets. RHT may also develop medical and healthcare assets.
Currently, RHT’s portfolio comprises of 11 operational clinical establishments, two operational hospitals, and four to-be-developed clinical establishments. These assets are all located in India.
On 2 July 2014 , FIL Limited, a substantial shareholder, acquired a total of 1 million shares at an average price of around S$0.93 each via the open market. The purchase raised FIL’s stake in RHT from 5.92% to 6.05%.
RHT’s last traded price is at S$0.94. Based on its net asset value per unit of S$0.804, it is currently trading at 1.2 times its book value. Units of the trust also carry a handsome distribution yield of 9.2%.
2. Petra Foods (SGX: P34)
Petra Foods was previously known as both a leading cocoa ingredients supplier to third-party food & beverage manufacturers, and a distributor of its own chocolate products. However, it had completed the sale of its Cocoa Ingredients division to European chocolate maker Barry Callebaut last June and has been concentrating its efforts on its Branded Consumer business since then.
Supported by two chocolate manufacturing facilities in Indonesia and the Philippines, Petra Foods owns a broad portfolio of brands that extends across multiple product categories and different price points. According to its website, the company has multiple distribution points across Asia and is also a market leader in Indonesia and the Philippines.
On 2 July 2014, aptly-named asset management firm Aberdeen Asset Management PLC purchased 777,000 shares at S$3.90 each, bringing its ownership stake in Petra from 8.972% to 9.10%. However, shortly thereafter on 11 July 2014, another asset management firm under the Aberdeen family, Aberdeen Asset Managers Limited (AAMLTD), sold 850,000 shares at S$3.905 each, bringing its stake in the company down from 5.096% to 4.957%; with that, AAMLTD would no longer be considered a substantial shareholder of Petra Foods.
Petra Foods last changed hands at S$3.82 and carries a high P/E (price/earnings) ratio of 38. It also sports an annualized 1.32% dividend yield.
3. Spindex Industries (SGX: 564)
Founded in 1981, Spindex Industries is an integrated solution provider for precision-machined components and assemblies with factories located in Singapore, Malaysia, China and Vietnam. The company distributes its products across three main business segments: Imaging and Printing; Automotive and Machinery; and Consumer & Lifestyle.
On 4 July, Mr. Tan Heok Ting, Managing Director of the firm, scooped up 900,000 shares at an average price of S$0.535 each via the open market. With it, his stake in the company rose from 0.27% to 1.05%.
Spindex Industries is now trading at S$0.54 and it sells for only 6 times trailing earnings even after scoring a year-to-date share price return of 50%. Shares of Spindex Industries also carries a 3.3% trailing dividend yield too.
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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.