2 Companies with Recent Insider 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.

With these as a backdrop, let’s take a look at two companies that have seen insider activity over the past two weeks.

1. Multi-Chem Ltd (SGX: AWZ)

Multi-Chem’s actually not in the chemicals industry as its name might suggest. Instead, the company provides precision drilling services for Printed Circuit Boards in addition to distributing products that are related to the selfsame electronics component.

On 22 May 2015, Foo Suan Sai, the Chief Executive of Multi-Chem, had bought 61,300 shares of the firm for an average price of S$0.585 each. The purchase had pushed his direct interest in the firm up from 39.746% to 39.814%. Foo’s wife, Han Juat Hoon, happens to be Multi-Chem’s Chief Operating Officer and a substantial shareholder of the firm; together, the couple now controls 67.945% of the company.

Multi-Chem last changed hands at S$0.51 last Friday, down 12.8% from Foo’s latest purchase price. At S$0.51, Multi-Chem’s trading at merely 8 times its trailing earnings and has a high dividend yield of 6.4% thanks to its annual dividend of S$0.0328 per share in 2014.

2. QAF Limited (SGX: Q01)

QAF’s business is centered on food, such as the production of proprietary brands of food and beverage products and the distribution of packaged loaf breads, pastries, and bakery products.

While the firm may not be familiar with many, its wide range of consumer food brands like Gardenia, Bonjour, Farmland and others would likely have some strong recognition amongst Singaporeans.

On 26 and 27 May 2015, Tarn Teh Chuen, the Head of Treasury of QAF, had sold a total of 58,000 shares of the company for a total sum of around S$66,000. The sale had reduced her already tiny stake in QAF from 0.27% to 0.26%.

Based on its closing price of S$1.12 last Friday, QAF is valued at 13.6 times its trailing earnings and sports a healthy dividend yield of 4.44% based on its annual 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.