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Institutional Investors Have Been Selling These 3 Stocks

There are many ways to find investment ideas. Some useful methods are to screen for stocks or to look at a list of stocks near their 52-week lows to sieve out potential bargains. Studying what institutional investors have been buying or selling is another avenue.

Institutional investors are typically large investment organisations, such as hedge funds, mutual funds, unit trust companies, sovereign wealth funds, insurance companies and so on. These investors tend to possess vastly greater resources than individual investors like you and me when researching stocks. Hence, it may be useful to keep a close eye on what they are doing, as a way to generate ideas.

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In this article, I will look at three Singapore stocks that were in the list of the top 10 stocks that have seen the highest net sales in dollar value by institutional investors for the week ended 27 April 2018. They are: Venture Corporation Ltd (SGX: V03), Sembcorp Industries Limited (SGX: U96), and Mapletree Greater China Commercial Trust (SGX: RW0U).

Source: Singapore Exchange; SGX Stock Facts

Venture is an electronics manufacturing services provider with expertise in a wide range of activities that include printing & imaging, networking & communications, retail store solutions & industrial, computer peripherals & data storage, and others.

In its latest earnings update, which was for the first quarter of 2018, Venture reported a 1.5% year-on-year increase in revenue to S$856.0 million. Its profit attributable to shareholders did much better, jumping by 72.2% to S$83.7 million. Similarly, Venture’s diluted earnings per share (EPS) climbed 67.4% year-on-year to 28.8 cents.

Venture also ended the reporting quarter with a strong balance sheet. As of 31 March 2018, the company had S$765.3 million in cash and equivalents, and just S$40.7 million in total debt. This gives Venture a net cash position of S$724.6 million, up significantly from S$399.6 million as of 31 March 2017.

Here are Venture’s comments on its outlook that were given in its latest earnings update:

“In spite of the weakened US dollar and heightened uncertainty due to geo-political environment, the Group managed to report a creditable set of results in the first quarter of 2018.

The Group remains steadfast in execution along several key initiatives. Venture continues to leverage its core capabilities in engineering, advanced manufacturing and supply chain management to drive operational excellence and deep value creation. Venture plans to grow its pool of strategic partnerships and its technological diversity with expansion into new and adjacent ecosystems. Excellent execution of these ongoing and new initiatives will support the Group’s endeavor to build sustainable growth and performance.”

The next company on the list, Sembcorp Industries, is a bona-fide conglomerate with four major business segments: Utilities; Marine; Urban Development; and Others. The Marine segment’s contribution comes from Sembcorp Industries’ 61% ownership stake in Sembcorp Marine Ltd (SGX: S51).

In early May, Sembcorp Industries reported its 2018 first quarter results.  Revenue for the reporting quarter jumped by 30% year-on-year to S$2.76 billion. But, EBITDA (earnings before interest, taxes, depreciation, and amortization) for the quarter actually fell by 17% year-on-year to S$286 million. Profit from operations for the quarter declined harder, as it came in at S$213 million, 21% lower compared to a year ago. Ultimately, Sembcorp Industries’ net profit for the quarter sank by 34% year-on-year to S$77 million.

The good news is that Sembcorp Industries managed to strengthen its balance compared to a year ago; its net debt position had declined from S$7.73 billion in 2017’s first quarter, to S$7.29 billion.This is what Sembcorp Industries had to say about its outlook in its latest earnings update:

“The market environment is expected to remain challenging in 2018. A broader-based global recovery is underway, aided by a rebound in investment and trade. As the Group repositions its businesses for the future, it is confident that it is well-placed to benefit from the market’s recovery.”

Mapletree Greater China Commercial Trust is third on my list. As a quick introduction, Mapletree Greater China Commercial Trust is a REIT that invests primarily in properties located in China and Hong Kong. It currently has three properties in its portfolio namely, Festival WalkGateway Plaza, and Sandhill Plaza.

In late April, the REIT released its  fourth quarter and full year earnings update for its fiscal year ended 31 March 2018 (FY2017/2018).. During the reporting quarter, Mapletree Greater China Commercial Trust’s gross revenue increased by 1.3% year-on-year to S$355.0 million, while its net property income inched up by 0.5% to S$287.2 million. Similarly, its distribution per unit (DPU) came in 1.9% higher at 7.481 cents.

Looking ahead, the REIT expects Festival Walk’s gross revenues to “grow moderately” in Hong Kong dollar terms, “in line with the improvement in the overall Hong Kong retail sales market.” The REIT also expects to achieve a positive rental reversion rate for Festival Walk’s leases that are expiring in FY2018/2019. For Gateway Plaza, Mapletree Greater China Commercial Trust thinks that the average rental reversion for leases expiring in FY2018/2019 will “grow modestly.” And coming to Sandhill Plaza, the property is “expected to continue to benefit from a healthy rental reversion for its leases expiring in FY2018/2019.”

It’s worth noting too that on March, Mapletree Greater China Commercial Trust had proposed an acquisition of six properties in Japan for a total value of around S$770 million. The acquisition was approved by the REIT’s unitholders in an EGM (extraordinary general meeting) on April. As such, the REIT is moving away from its historical focus on China and Hong Kong – this might be a positive from a diversification perspective.

Looking at what institutional investors are doing could be a useful tool in your toolkit when sourcing for investment ideas. But do note that the information presented here is by no means a recommendation to take any action on the stocks mentioned. Instead, it should be viewed only as a useful starting point for further research.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.