2 Companies with Insider and 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. Osim International Ltd  (SGX: O23)

OSIM retails healthy lifestyle products including massage chairs, foot reflexology machines, and fitness equipment predominantly in North and South Asia under its flagship OSIM brand.

In addition, the company also retails health supplements through the Richlife/GNC store names and has fingers in luxury tea products through an investment in TWG Tea.

On 7 July 2015, Ron Sim, who’s both Chairman and Chief Executive of Osim, had snapped up 500,000 shares of the company via the open market  at an average price of S$1.57 each. The acquisition had bumped up Sim’s stake by 0.07% to 65.55%. The following day on 8 July, Sim was in a married-deal which saw him purchase another 200,000 shares for a sum of S$312,000. All told, Sim now has a 65.57% stake in Osim.

It’s worth noting that Osim’s stock price has fallen by nearly half to S$1.52 last Thursday since peaking at around S$2.90 in April 2014.

2. Sitra Holdings (International) Ltd (SGX: 5LE)

Sitra Holdings is a distributor of wood-based products and lifestyle outdoor furniture. With a 27 year track record, the company has amassed over 277 corporate customers in 48 countries spread across four continents (Australia, Asia, Europe, and North America).

The company also places quality management seriously, with it having been awarded the BS EN 9001-2008 certification for quality management in each year since 1997.

On 6 July 2015, Chew Hua Seng, a substantial shareholder of the company, had bought 7.3 million shares at an average price of S$0.015 each. With that, his stake in the firm had jumped by almost one percentage point from 5.04% to 6.02%.

Sitra closed last Thursday with a price of S$0.012, at that price, the company has an extremely low price-to-earnings ratio of just 0.5. But, this is due to a massive jump in one-off gains for the company in 2014; there was a S$10 million fair value gain on financial assets and S$8.4 million of divestment gains.

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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 owns shares in Osim International.