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2 Companies with Insider and/or Substantial Shareholder Activity

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.

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 as a backdrop, let’s take a look at two companies that have seen either insider or substantial shareholder activity over the past two weeks.

1. Valuemax Group Ltd  (SGX: T6I)

Founded in 1988, Valuemax provides pawn broking services through its network of 30 outlets (as at end-2014) in Singapore and Malaysia. Apart from its mainstay pawn-broker business, the company has also ventured into the money lending business in search of growth.

According to a recent late March announcement, Valuemax has decided to offer unsecured loans to high net-worth individuals who are in need of cash for business/commercial reasons. Despite charging higher interest rates than banks for this service, Valuemax thinks that there’s room for growth in this area due to the convenience and swiftness with which its loans can be disbursed.

On 10 April, Yeah Hiang Nam, chief executive of Valuemax, purchased 199,000 shares at an average price of S$0.345 each. As a result, his total stake in Valuemax had increased marginally from 74.66% to 74.7%.

Valuemax’s shares last changed hands at S$0.355 on Monday. At that price, the company trades for 21 times its trailing earnings and has a dividend yield of 2.5% (based on a dividend of 0.88 Singapore cents per share for 2014).

2. Venture Corporation Limited (SGX: V03)

Venture has established a 30 year track-record for itself as a leading electronics services provider in Singapore.

The company provides design services (which sees Venture helping clients design unique products/tools); manufacturing services (in which Venture provides a “full spectrum of high value-added, integrated turnkey manufacturing services”); and e-fulfillment services (where Venture helps customers “optimize the overall supply chain cost structure”).

On 13 April, investment management firm Aberdeen Asset Management PLC had sold 533,800 shares of Venture for a total sum of S$4.54 million. Despite the sale, Aberdeen still remains a substantial shareholder in Venture with an 18.87% stake; prior to the sale, Aberdeen had controlled 19.07% of Venture.

Venture’s shares last changed hands at S$8.47 on Monday. At that price, the company has a trailing price-to-earnings (PE) ratio of 16 and a tasty dividend yield of 6% (based on its dividend of S$0.05 per share in 2014).

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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.