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2 Companies with Insider and 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 either insider activity or substantial shareholder activity over the past two weeks.

1. Far East Group Ltd (SGX: 5TJ)

Founded in 1953, Far East Group is now a provider of refrigeration and air-conditioning systems and products.

The company has three business segments: 1) Residential and Commercial (Air-Conditioning); 2) Commercial and Light Industrial (Refrigeration); and 3) Oil, Marine and Gas (Refrigeration and Air-Conditioning).

As a one-stop refrigeration and air-conditioning systems provider, Far East Group counts supermarkets, food processing facilities, and even oil rigs as its end users. Some of the company’s customers include well-known destinations like Resorts World Sentosa and retail chains like NTUC Fairprice.

On 23 January 2015, Leng Chee Keong bought 150,000 shares of the company at S$0.16895 each. This transaction increased his stake in the firm from 5.83% to 5.97%. Leng’s currently the Chief Operating Officer of Far East Group.

Far East Group’s shares last traded at S$0.15 on Friday.  At this price, the company has a trailing price/earnings (PE) ratio of 7.6 and boasts a dividend yield of 3.8%.

2. Golden Agri-Resources Ltd (SGX: E5H)

Golden Agri-Resources is an integrated palm oil plantation company with operations primarily in Indonesia and China.

As an integrated palm oil outfit, Golden Agri-Resources’ business spans the upstream and downstream portion of the palm oil industry. In other words, the company cultivates oil palm trees, harvests the fruits, processes the fruits into crude palm oil and palm kernel oil, and refines the oils into consumer products such as cooking oils and margarine.

Golden Agri-Resources owns a number of consumer product brands like Filma, Good Fry (in Indonesia), and Golden Carrier, Seagull (in China).

On 23 January 2015, investment management outfit Silchester International Investors LLP – a substantial shareholder of Golden Agri-Resources – had bought 7.39 million shares at an average price of S$0.42 each. With the transaction, Silchester International Investors’ stake in Golden Agri-Resources had increased from 7.97% to 8.03%.

Golden Agri-Resources’ shares last changed hands at S$0.42 on Friday. The company trades at 16.4 times its trailing earnings with a 1.9% 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.