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. Silverlake Axis (SGX: 5CP)
Silverlake Axis has managed to become a leading provider of end-to-end universal integrated banking solutions to major financial institutions since it started operations in 1989. The company’s Silverlake Axis Software and Services Solutions have been implemented at over 100 organisations across Asia, including 40% of South East Asia’s top 20 largest banks.
On 11 July, Goh Peng Ooi, Silverlake Axis’ executive director and a majority owner of the company, sold 27.7 million shares via a married deal. According to a structured sale agreement with HNA Group entered in July 2010, Mr. Goh’s latest transaction is actually a transfer of shares to HNA Group in achievement of certain milestones.
The deal seems to have produced great gains for HNA Group given the terms discussed previously:
“At exit through sale in the market or back to IHL [Intelligentsia Holding Ltd; Goh’s holding company for his stake in Silverlake Axis], HNA will enjoy all gains above S$0.16, with Mr Goh Peng Ooi receiving S$0.16, with the proviso that Mr Goh Peng Ooi will only receive market price should there be an Adverse Market Event upon exit and the market share price is below S$0.16.”
With Silverlake Axis now trading at S$1.14, that’s a substantially higher price than the price of S$0.16 per share at which HNA Group would ‘buy’ over those 27.7 million shares from Mr. Goh. The transaction has decreased Mr. Goh’s stake in the company from 67.62% to 66.39%. The company’s valued at 28 times trailing earnings at its current price and carries a 3.3% dividend yield.
2. Yamada Green Resources (SGX: MC7)
Yamada operates one of the largest shitake mushroom cultivation bases in the Fujian province of China. The company’s businesses can be divided into two major divisions: the Self-cultivated segment; and the Processed food segment. Yamada’s self-cultivated products include edible fungi, bamboo, and bamboo shoots. They are mainly sold as fresh produce to wholesalers of agricultural food products in the company’s domestic markets.
As for Yamada’s processed food products which include processed vegetables, water-boiled bamboo shoots, and konjac-based dietary fibre food products, they are sold in major cities in China and exported as well to overseas markets under the brand names of the company’s customers. The exported products predominantly end up in Japan.
On 15 July 2014, Chen Qiuhai, Yamada’s executive chairman and chief executive, had purchased 200,000 shares of his company at S$0.17 each via the open market. With that, Chen’s stake in Yamada had rose from 38.98% to 39.02%. Mr. Chen had executed the trades using his wholly-owned company, Sanwang International Limited.
Yamada last changed hands at S$0.17 per share. At that price, it’s valued at a low price/earnings (P/E) ratio of only 5. The company also sports an annualised dividend yield of 1.6%.
3. Yanlord Land (SGX: Z25)
Yanlord Land is a real estate developer based in China that focuses on residential properties, which include complexes, villas, and serviced apartments. In addition, Yanlord Land also has experience with developing shopping malls. Besides being a developer, Yanlord Land also retains some commercial real estate and integrated developments for rental revenue.
The company has projects in key high-growth cities within the five major economic regions of China. These are namely the Yangtze River Delta (Shanghai, Nanjing, and Suzhou); Pearl river Delta (Zhuhai and Shenzhen); Western China (Chengdu and Guiyang); Bohai Rim (Tianjin and Tangshan); and Hainan International Tourist Island (Sanya).
On 10 July 2014, Wee Ee Chao, a substantial shareholder of Yanlord Land, scooped up 19.45 million shares of the company for a total sum of S$22 million, or around S$1.13 per share. As a result, his stake in Yanlord had grown from 6% to 7%. Mr. Wee is the chairman and managing director of UOB-Kay Hian Holdings (SGX: U10), and holds directorships in several firms like Haw Par Corporation (SGX: H02) and UOL Group (SGX: U14).
Yanlord Land is valued at only 7 times its trailing earnings at its current price of S$1.17. In addition, it carries a trailing dividend yield of 1.1%.
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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 company mentioned.