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…
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 these in mind, let’s take a look at three companies with both insider and substantial shareholder activity over the past two weeks.
1. CapitaLand Limited (SGX: C31)
CapitaLand, one of Asia’s largest real estate outfits, has diversified interests across the commercial, retail, and residential real estate sectors. The company is also a bona fide MNC (multi-national corporation) with businesses in Australia, Europe, and the countries of the Gulf Cooperation Council. These are in addition to its 2 key geographical markets of Singapore and China.
There are also many other listed entities linked to CapitaLand. These include Australand Holdings (listed in Australia), Ascott Residence Trust (SGX: A68U), and four other real estate investment trusts (REITs). The REITs are namely CapitaCommercial Trust (SGX: C61U), CapitaMall Trust (SGX:C38U), CapitaRetail China Trust (SGX:AU8U), and CapitaMalls Malaysia Trust (listed in Malaysia).
On 5 August 2014, the day CapitaLand released its 2nd quarter results, BlackRock, Inc., a substantial shareholder of the company, snapped up 1.103 million shares on the open market for a total sum of S$3.8 million. That works out to a purchase price of S$3.445 per share. The transaction also increased BlackRock Inc.’s stake in the company from 5.98% to 6.01%.
CapitaLand last traded at S$3.35 last Friday. That gives the company a trailing PE (price/earnings) ratio of 16.5 and a dividend yield of 2.7%.
2. First Sponsor Group Ltd (SGX: ADN)
First Sponsor Group is focused on the real estate market in China in terms of developing properties, holding on to properties for investment purposes, and providing property financing services.
With respect to the development of residential and commercial properties, the company’s key geographical markets in the country lie in the second-tier cities of Chengdu and Dongguan.
As for its property financing business segment, these are conducted primarily through secured entrusted loan arrangements, with a particular focus on Shanghai. Moving forward, the company may selectively expand its property financing business into Chengdu, Dongguan, and certain tier-one cities.
The company would likely have strong support when it decides to expand given the stature of its two key controlling shareholders – the Hong Leong group of companies, and Tai Tak Estates Sendirian Berhad. Both are well recognised and well respected companies in Asia, including China.
In any case, it should also be noted that First Sponsor Group is a newly-listed entity as it was just listed on 22 July this year at a listing price of S$1.50. Somewhat unfortunately, the company’s share price has fallen by 20% to S$1.205 as of last Friday’s close. The short term price declines have not deterred Mr. Ho Han Leong Calvin, Non-Executive Vice-Chairman of First Sponsor Group Limited, from buying shares of the company though. From 24 July to 1 August 2014, he had been buying small chunks of shares, which have increased his stake in the company from 44.2% to 44.3%.
Interestingly, over the same period, there have been several other insiders who have been picking up shares of the firm too. One of them is Mr. Yee Chia Hsing, the Lead Independent Director of First Sponsor Group. He had bought a total of 100,000 shares at an average price of S$1.245 each, bringing his stake in the company to 0.02%.
First Sponsor Group last changed hands at S$1.205 on Friday and is valued at 7 times its trailing earnings. The company has not issued any dividends as yet.
3. Keppel Corporation Limited (SGX: BN4)
Keppel Corp, one of the largest conglomerates in Singapore, consists of a number of moving parts which are involved with marine, infrastructure, and property businesses. These businesses are represented partially by other locally-listed companies like Keppel Telecom. & Transport. Ltd. (SGX: K11) (for the infrastructure business) and Keppel Land Ltd (SGX: K17) (for the property business).
On 5 August 2014, Temasek Holdings (Private) Limited, a substantial shareholder of the company, reported that its interest in Keppel Corp has fallen from 21.06% to 20.99% due to the sale of 1.32 million shares.
Keppel Corp last changed hands at S$10.80 on Friday and is currently selling for a modest PE ratio of 10. It also sports a dividend yield of 3.9%, which can be something to cheer about.
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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.