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. Though, it must be noted 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 in mind, let’s take a look at two companies with either insider activity or substantial shareholder activity over the past few weeks.

1. Japan Foods Holding Ltd  (SGX: 5OI)

Food and beverage (F&B) retailer Japan Foods has a stable of Japanese restaurant brands under its umbrella across Asia. The biggest brand in its portfolio would be Ajisen Ramen. Some of the other restaurant brands associated with Japan Foods include Kazokutei, Botejyu, Fruit Paradise and Menya Musashi. All told, the company has a total of 13 different brands.

On two separate occasions in November (the 9th and 12th of the month), Chin May Yee, Emily had purchased a collective 71,200 shares of the company for a sum of nearly S$33,600.

While Chin is not considered an insider of the company, she is the spouse of Eugene Wong, Japan Foods’ non-executive director. As such, Wong’s deemed interest in the company had inched up from 4.8% to 4.84% with the purchases.

Japan Foods’ latest results, released on 6 November 2015, saw a 2.5% year-on-year climb in quarterly profit to S$15.9 million. But with tighter cost controls, Japan Foods’ profit for the quarter managed to jump by 36.8% to S$1.35 million. The company’s shares last traded at S$0.45 each and carry a price-to-earnings ratio of 15.

2. Super Group Ltd  (SGX: S10)

Super Group’s an instant F&B products manufacturer with businesses mainly in South East Asia at the moment. . The company dividends its business into Branded Consumer (BC) and Food Ingredients (FI).

Some of the brands in Super’s BC segment include Super Power and Owl 3-in-1 Instant Coffee. Meanwhile, the FI segment manufactures ingredients such as spray-dried coffee, freeze-dried coffee, non-dairy creamer, and botanical herbal extracts.

On 5 November 2015, fund management outfit Matthews International Funds, had bought 157,200 shares of the company at S$0.92 each. With the purchase, Matthews International Funds became a substantial shareholder of Super as its stake in the company had inched up from 4.99% to 5.01%

A week after, Super released its fiscal third-quarter results. The numbers weren’t pretty as revenue fell by 7% year-on-year to S$121 million while profit sunk by 26% to S$7.4 million. At its last closing price of S$0.88, Super is valued 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