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2 Companies with Recent 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 substantial shareholder activity over the past two weeks.

1. Civmec Ltd  (SGX:P9D)

Civmec provides heavy engineering and construction services to the resources (think oil & gas and mining) and infrastructure sectors in Australia. The company believes it has the capabilities to add value across an entire project’s supply chain “from precast concrete, fabrication, insulation construction and project management to offshore logistics and after sales maintenance service.”

On 27 July 2015, Michael Lorrain Vaz, a substantial shareholder of the firm, bought 100,000 shares at S$0.34 each via the open market. With the acquisition, Vaz’s total stake in Civmec had increased slightly from 7.9% to 7.92%.

Civmec last changed hands at S$0.365 last Thursday, giving it a low price-to-earnings ratio of just 5. It’s worth noting that Civmec’s shares have received a real shellacking over the past year, falling by 50%, possibly due to the weaknesses in the oil & gas industry and Australia’s mining sector.

2. ARA Asset Management Limited (SGX: D1R)

ARA Asset Management is an integrated fund manager which earns its keep mainly from the management of real estate investment trusts and real estate funds.

Some Singapore-listed REITs which are under ARA Asset Management’s care include Fortune Real Estate Investment Trust (SGX: F25U)Suntec Real Estate Investment Trust (SGX: T82U), and Cache Logistics Trust (SGX: K2LU).

On 22 July15, fund management outfit Franklin Resources Inc., a substantial shareholder of ARA Asset Management, had bought some 8.8 million shares of the company for a total sum of S$15.444 million. This transaction indicates an average purchase price of S$1.76 per share and boosted Franklin Resources’ total stake in the firm from 8.45% to 9.49%.

With a closing price of S$1.71 last Thursday, ARA Asset Management is trading at 17 times its trailing earnings.

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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.