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….
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 shares, or in other words, putting more money where their mouth is.
1. GSH Corporation Ltd (SGX: J16)
Previously a trading company that distributed photographic equipment and a host of consumer goods (like health and personal care products), GSH Corp underwent a reverse takeover (RTO) in 2012 and became a real estate investor and developer.
GSH Corp now owns the Sutera Harbour Resort in Kota Kinabalu, situated in between the shores of the South China Sea and Mount Kinabalu, East Asia’s tallest mountain.
The company also has three properties under development in Malaysia, of which two are high-end residential developments in Kota Kinabalu.
In addition, GSH Corp was part of a consortium that acquired Equity Plaza – now renamed as GSH Plaza – in 2014. The property, situated in the heart of Singapore’s Central Business District, is undergoing an external and internal makeover; GSH Corp plans to “launch the sale of more than 100 strata office units at GSH Plaza” starting from the end of this month.
On two separate occasions on 3 March and 5 March, Sam Goi Seng Hui, Executive Chairman of GSH Corp (and also popularly known as Singapore’s “Popiah King”), bought a total of 12.458 million shares (at S$0.076 per share for 10 million shares on the first day and at S$0.075 per share for 2.458 million shares on the second day).
These purchases helped raise Sam Goi’s stake in the firm from 47.32% to 47.45%.
GSH Corp’s shares last traded at S$0.076 last Friday. At that price, the company’s valued at 13 times its trailing earnings and carries a relatively low dividend yield of 0.66% (based on its dividend for its last completed financial year).
2. Select Group Limited (SGX: 5FQ)
Select Group is an integrated food caterer that provides catering services for corporate, community, and private functions. The company’s catering services serve different market segments, from mass-market to fine dining.
In addition, Select Group also runs food & beverage (F&B) retail outlets. Some of its brands include Lerk Thai, Hong Kong Sheng Kee Dessert, and Peach Garden.
From 2 March to 10 March 2015, Tan Chor Khoon, the Managing Director of Select Group, had purchased a total of 227,800 shares at varying prices between S$0.43 and S$0.45 per share over four different days. These transactions had raised his total interest in the company from 21.13% to 21.27%.
Select Group’s shares closed at S$0.42 last Friday. At that price, the caterer is valued at 10 times its trailing earnings and has a dividend yield of 4.76% (based on its dividends for its last completed financial year).
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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.