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….
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 insider activity over the past two weeks.
1) Giken Sakata S Ltd (SGX: 542)
Giken Sakata is an integrated contract manufacturer of micro shafts and other precision parts with more than 30 years of experience. Its business is segmented into two divisions:
1) Mechanism division where high precision components, such as plastic injection molding parts and printed circuit boards, are made.
2) Microshaft division where precision turned-parts including motor shafts and customized turned components are manufactured for customers in various industries.
In September 2014, Giken Sakata ventured into the energy business through the acquisition of a 53.7% stake in Cepu Sakti Energy (CSE), an oil & gas company based in Indonesia. According to the firm’s media release on 26 November 2014, Giken’s business model in the energy business is centered on the “Old Wells Programme” where it is able to extract oil from old oil wells with minimal risks involved and at low costs.
On 6 January 2015, Charles Madhavan, a director of CSE and a substantial shareholder of Giken Sakata,, purchased 2 million Giken Sakata shares for a total sum of S$510,000. The transaction increased Madhavan’s stake in the firm from 16.93% to 17.35%.
Giken Sakata’s shares last traded at S$0.25 on Monday. At this price, the company has a price/earnings (PE) ratio of 33.
2) Swissco Holdings Ltd (SGX: ADP)
Swissco started out in the 1970’s as a ship supplies company and gradually evolved to offer a comprehensive range of services including chartering services, maritime services, ship repair, and maintenance services. It currently has operations across South East Asia and the Middle East.
The company owns and operates a mixed cluster of 31 vessels ( offshore support vessels, boats, tugs, and barges) to support its customers’ marine logistics needs. With its waterfront facility in Singapore, Swissco complements its chartering services with the provision of ship repair and maintenance services.
On 29 December 2014, Tan Fuh Gih, Executive Chairman and Executive Director of Swissco, acquired 100,000 shares of the company at an average price of S$0.53 each. Through this purchase, Tan’s interest in the company had increased slightly from 20.21% to 20.22%.
Then, on 6 January 2015, Lim How Teck, , also purchased 50,000 shares at S$0.50 each. With that, his stake in Swissco, while still tiny, more than doubled from 0.007% to 0.015%. Lim holds the title of Independent Non-Executive Director at Swissco.
Swissco’s shares last traded at S$0.505 on Monday. The company is valued at 7.5 times its trailing earnings and carries a 3.9% dividend yield.
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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.