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2 Companies with Managements Putting Their Money Where Their Mouth Is

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.

With these in mind, let’s take a look at two companies with managements who have made insider purchases – in other words, putting their money where their mouth is – over the past two weeks.

1. Japfa Ltd (SGX: UD2)

Japfa is a leading agri-food company in the pan-Asian region which specializes in providing quality dairy, protein staples (poultry, beef, swine & aquaculture), and packaged foods. Its business covers the whole value chain of the food industry from breeding to milking/fattening and finally to the processing/distribution of the poultry meat and milk. Some of its popular consumer food brands include Greenfields, So Yumm and Real Good.

On 12 December 2014, Tan Yong Nang, Chief Executive Officer and Executive Director of the firm, purchased 400,000 shares at an average price of S$0.53 each through his wholly-owned investment vehicle Great Alpha Investments Limited. The transaction upped Tan’s stake in Japfa from 3.45% to 3.47%.

Japfa’s shares last changed hands at S$0.51 last Friday, down 36% from its listing price (Japfa was listed only in August this year). At its latest close, the company is valued at 15 times its trailing earnings.

2. SATS Ltd  (SGX: S58)

SATS is the leading provider of gateway services and food solutions in the Asian region. The company’s Food Solutions segment covers airline catering, food distribution, industrial catering, and other related services. Meanwhile, the Gateway Solutions segment is involved in ground handling services of passengers, flights, and cargo and it has a presence in more than 30 airports in Asia.

On 10 December 2014, Alexander Charles Hungate, President and CEO of the company, snapped up 100,000 shares for a total sum of S$289,200 via the open market. The purchase has increased his direct stake in the firm from a tiny 0.00932% to 0.01831%. It is also noteworthy to mention that SATS has been continually buying back its shares, with some 11.567 million shares being bought back since the company’s current share buyback mandate started on 23 July 2014.

SATS’ shares last traded at S$2.86 last Friday. At this price, the company has a PE ratio of 18 and a dividend yield of 4.55%.

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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.