2 Companies with Management Putting Their Money Where Their Mouth Is

Credit: reynermedia

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.

With these in mind, let’s take a look at two companies that have recently seen insiders buying even more shares, or in other words, putting even more money where their mouth is.

1. Falcon Energy Group Ltd (SGX: 5FL)

Listed in 2004, Falcon Energy provides a range of services for the offshore marine and oil & gas sectors, from the initial exploration and drilling stages to the production and post-production stages.

The company has five business divisions which include Marine, Oilfield Services, Drilling Services, and Resources. Falcon Energy owns offshore support vessels and currently has orders for a fleet of modern jack-up rigs which are penciled in for delivery between mid-2015 and mid-2016. These assets are (and will be) used by the company in its various business activities under the different divisions.

According to the compay’s description of itself, it has a solid track record of more than 30 years and counts many of the established oil majors as its customers. These include giants like Shell, ExxonMobil, Chevron, BP and PetroChina.

Given the shellacking that the price of oil has received over the past six months, Falcon Energy, with its close ties to the oil & gas industry, has seen its shares fall by 29% as well. Those falling prices does not seem to have bothered Neo Chin Lee too much though.

Neo, the Chief Operating Officer and an Executive Director of Falcon Energy, bought 500,000 shares of the company at S$0.2697 each on 11 February 2015. The purchase had bumped up Neo’s stake in the firm from 1.53% to 1.61%.

Falcon Energy last traded at S$0.285 on Wednesday.  At that price, the company is valued at only 4.3 times its trailing earnings and carries a trailing-12-months’ dividend yield of 5.5%.

2. Global Yellow Pages Limited (SGX: Y07)

Global Yellow Pages’ product would likely be familiar to many: The company produces the “Yellow Pages Directories.

But despite Global Yellow Pages being the largest publisher of directories and provider of classified directory advertising services in Singapore, the advent of the internet has led to the phasing-out of physical directories by society.

As a result, the company had to diversify away from its core business and it has done so through purchasing a stake in China-based edible fungi supplier Yamada Green Resources Ltd (SGX: MC7) and the acquisition of dessert makers in Australia. In addition, Global Yellow Pages had also announced late last year its proposal to acquire a shopping mall owner in New Zealand.

It’s hard to tell if all these moves are a little too late for the company to make now. After all, profit at the firm have shrunk from 13.3 cents per share for the year ended 31 March 2004 to just 0.196 cents over the last 12 months. This has resulted in a stunning 98% decline in share price over the past 10 years.

There’s also no respite for Global Yellow Pages over the short-term. In the last three months, the market still has a clear disdain for Global Yellow Pages judging from the company’s 17% decline in share price over that period.

But, none of the above dynamics seems to have deterred Tan Cheng Han from buying shares. Tan, the Non-Executive Deputy Chairman of Global Yellow Pages, had purchased 400,000 shares of the company for a total sum of S$16,000 on 16 February 2015. With the purchase, he now owns a 0.023% stake in the company; Tan held no shares in the firm previously.

Global Yellow Pages’ shares closed at S$0.039 on Wednesday. They carry a trailing P/E (price to earnings) ratio of 20. The firm has not paid a dividend over the past 12 months.

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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.