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 that have had substantial shareholder activity over the past two weeks.

1. Noble Group Limited (SGX: N21)

Operating from over 140 locations worldwide, Noble Group manages a portfolio of global supply chains covering a wide range of commodities, such as agricultural and energy products, and metals, minerals, and ores.

By being the “middle-man”, Noble sources bulk commodities from low cost regions such as South America, and South Africa, and supplies the demand from high growth markets located in Asia and the Middle East.

On 29 December 2014, Franklin Resources, Inc. commonly known as “Franklin Templeton Investments,” scooped up 992,000 shares of Noble for a total sum of S$1.1 million. The transaction has managed to prop up Franklin Resources’ stake in the company from 5.98% to 6%.

Noble Group is trading at S$1.14 as of 31 December 2014. At that price, the company’s valued at 30 times its trailing earnings and has a modest dividend yield of 0.8%.

2. REX International Holding Ltd (SGX: 5WH)

Rex, an oil & gas exploration and production (E&P) outfit, currently operates in Norway, UAE, Oman, and the U.S.; these are areas where the company has oil & gas assets. Within the industry, Rex is known for its expertise in exploration-related technologies – such as Rex Gravity, Rex Seepage, and Rex Virtual Drilling – which it provides to other oil & gas companies.

On 23 December 2014, FIL Limited, a fund management outfit and substantial shareholder of the firm, snapped up 500,000 shares for a total consideration of S$234,850. The transaction pushed up FIL Limited’s interest in Rex from 6.97% to 7.01%.

Rex’s shares last traded at S$0.38 on Wednesday. With no profits in sight at the moment, the company does not have a P/E ratio and has not paid out a dividend as well.

But, Rex is taking steps to grow its business. In December, the company announced that it has completed the full acquisition of Rex Technology Management Ltd (“RTM”). The purchase allows Rex to obtain RTM’s suite of proprietary and innovative exploration technologies.

There a number of benefits that come with the acquisition, according to Rex. The first thing is that an annual value of about US$10 million from RTM’s existing contracts will be consolidated into Rex’s revenue from December 2014. Secondly, with complete control over the use of RTM’s technologies, Rex can now offer a standalone service for a fee to partners and clients who are unable to offer equity stakes in concessions; this can “significantly reduce” the exploration costs of Rex’s clients.

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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.