2 Companies with Substantial Shareholder Activity

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 managing 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 two companies with substantial shareholder activity over the past two weeks.

1. Best World International Limited (SGX: 5ER)

Best World, a Singapore-based direct selling outfit, is engaged in developing and marketing healthcare equipment as well as skincare, personal care, nutritional, and wellness products. The company has a network of over 250,000 independent distributors and members in 11 markets, which includes Singapore, Thailand, Indonesia, and Malaysia.

Last month, Best World made an additional capital injection of S$9 million into its wholly-owned subsidiary Best World (Zhejiang) Pharmaceutical Co. to meet pre-requisites for an application for a Direct Selling License in China.  The transaction was funded by borrowings.

On 30 September 2014, Best World announced that D2 Investment Pte. Ltd, a substantial shareholder in the firm, had bought more shares and increased its stake in the firm from 34.81% to 35.02%. D2 Investment had paid S$99,975 in total for the purchase.

Best World’s shares closed at S$0.215 last Friday with a Price-to-earnings (PE) ratio of 27 and dividend yield of 2.8%.

2. Tuan Sing Holdings Limited (SGX: T24)

Tuan Sing is a company with a number of hats – it has three business segments, namely, Property, Hotels, and Industrial Services.

Under its Property segment, Tuan Sing develops and invests in residential, commercial, and industrial real estate in Singapore and China. As for the Hotels segment, it houses two five-star Hyatt-branded hotels in the Australian cities of Melbourne and Perth. Lastly, Tuan Sing’s Industrial Services segment sees it being involved with the trading and marketing of various industrial commodities, consumer products, and food products in Asia.

On 25 Sep 2014, Mr. Koh Wee Meng, the chief executive of Fragrance Group Limited (SGX: F31), had purchased 6.5 million Tuan Sing shares at an average price S$0.431 each via the open market. The transaction bumped up Mr. Koh’s stake in Tuan Sing from 4.46% to 5.02%

Tuan Sing’s shares last changed hands at S$0.475 (a 52-week high for the firm) last Friday. The company sports a PE ratio of 11 and a dividend yield of 1.05%.

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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.