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 –it must be noted though that there is no basis for that as insiders might be selling for their own personal reasons….
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 –it must be noted though 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 three companies with substantial shareholder and insider activity over the past two weeks.
1. Hwa Hong Corporation Limited (SGX: H19)
Listed since 1969, Hwa Hong started as a manufacturing outfit but has since grown into an investment holding company with stakes in many different types of businesses.
For instance, Hwa Hong, through its subsidiaries, invests in, develops, and rents out residential and commercial properties. The company is also involved with trading of consumer products and the packing and trade of edible oils. To top it off, Hwa Hong also provides business management and consultancy services.
Between 29 September 2014 and 14 October 2014, Mr. Ong Kay Eng, a substantial shareholder of the Company, had gradually increased his stake in the firm from 6.609% to 6.842% through a series of purchases. Ong happens to be the brother of Mr. Ong Choo Eng, the Group Managing Director of Hwa Hong.
Hwa Hong’s shares last traded at S$0.325 yesterday. That translates into a price/earnings (PE) ratio of 17 and a dividend yield of 3%.
2. Roxy-Pacific Holdings Ltd (SGX: E8Z)
Roxy-Pacific invests and develops residential and commercial properties in Singapore. The company has an established brand name when it comes to small- and medium-sized residential developments with unique design features targeted at the middle to upper-middle income earners.
In addition, Roxy Pacific owns the Grand Mercure Roxy Hotel and Roxy Square Shopping Centre; both properties are strategically located in the East Coast area of Singapore and are a short distance from Changi Airport.
On 2 October 2014, Mr. Tay Kah Poh, an Independent Director of the Company, bought 50,000 shares at an average price of S$0.565 each. The purchase bumped up his stake in the firm slightly from 0.08% to 0.083%.
Tay was hardly the only one buying though. On 13 October 2014, Mr. Teo Hong Lim, Roxy-Pacific’s Executive Chairman and Chief Executive Officer, had bought 60,000 shares at S$0.55 each. Teo currently controls 58.47% of the company (697.87 million shares).
Rosy-Pacific’s shares last traded at S$0.565 on Wednesday. That price gives the company a PE ratio of 7 and a dividend yield of 3.5%.
3. CapitaMall Trust (SGX: C38U)
CapitaMall Trust is Singapore’s largest real estate investment trust in terms of market capitalisation and asset size
The REIT owns 16 shopping malls located in the suburban areas and downtown core of Singapore. Some of its malls include IMM Building, Plaza Singapura, and the newly-opened Westgate.
Interestingly, CapitaMall Trust has obtained an ‘A2′ issuer credit rating – it is the highest rating assigned to any Singapore REIT by Moody’s Investors Service.
On 7 October, BlackRock, Inc. and its various subsidiaries became substantial shareholders of Capitamall Trust by purchasing 1.084 million shares from the market at an average price of S$1.934 each. The purchase increased BlackRock’s stake in CapitaMall Trust from 4.98% to 5.01%.
CapitaMall Trust last changed hands at S$1.92 on Wednesday. The REIT is valued at a Price/ Book ratio of 1 and carries a high distribution yield of 5.4%.
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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.