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.

In this article, I will look at three Singapore stocks that were in the last of the top 10 stocks that saw the highest net sales in dollar value by institutional investors for the week ended 25 May 2018. They are: Singapore Telecommunications Limited (SGX: Z74), Singapore Exchange Limited (SGX: S68), and Venture Corporation Ltd (SGX: V03).

Source: Singapore Exchange; SGX Stock Facts

Singtel is a company that needs little introduction, given that it’s the largest of the three main operational telcos in Singapore.

In Singtel’s latest earnings update for the quarter ended 31 March 2018 (which is its fiscal fourth quarter), the company reported a 0.4% year-on-year increase in revenue to S$4.3 billio and a 19% decline in net profit attributable to shareholders to S$780.6 million. Weaker results from some of Singtel’s regional associates (Airtel in India and Telkomsel in Indonesia), and adverse currency movements, were big culprits in Singtel’s bottom line decline.

Sintel’s board also recommended a final dividend of S$0.107 per share for the quarter, bringing its total ordinary dividend for FY2018 to S$0.175 per share (this excludes a special dividend of S$0.03 per share). This is flat compared to the total dividend of S$0.175 per share for FY2017.

For FY2019, Singtel expects: (a) its revenue to grow in the “low single digit” range; (b) its EBITDA – earnings before interest, taxes, depreciation, and amortisation – to be “stable”; (c) capital expenditure of around S$2.2 billion; (d) free cash flow of around S$1.9 billion; (e) dividends of around S$1.4 billion from its regional associates; and (f) its dividend to be maintained at S$0.175 per share. In fact, Singtel also expects its dividend for FY2020 to be at S$0.175 per share, after which it will revert to a payout ratio of between 60% and 75% of its underlying net profit.

The next company, Singapore Exchange is again a company that is likely to be familiar to many, since it runs the only stock exchange in town. Singapore Exchange delivered a strong earnings update for the first quarter of 2018 (the quarter happens to be the company’s third fiscal quarter).

In the reporting quarter, Singapore Exchange experienced a 9.6% year-on-year increase in revenue to S$222.2 million, and a 21.0% jump in profit attributable to shareholders to S$100.5 million. As of 31 March 2018, the company had S$800.0 million in cash on the balance sheet and no debt; the balance sheet had strengthened from a year ago when there was S$739.4 million in cash and no debt. An interim dividend of S$0.05 per share was also declared, unchanged from a year ago,

Singapore Exchange’s chief executive, Loh Boon Chye, shared some comments on the performance in the earnings update:

“We achieved a strong set of results this quarter, with our net profit reaching a new 10-year record high and our revenues hitting their highest levels since we listed in 2000. We actively engaged liquidity providers and focused on outreach to investors, which contributed to increased activity in the securities market. Our marketing efforts, together with longer trading hours enabled by our new derivatives trading and clearing platform, added to an increase in global participation across products and trading sessions.”

On its future, this is what Singapore Exchange had to say:

“With improved global growth, more central banks are seen adopting tightening measures, which will lead to investors rebalancing their portfolios. We expect market activity to improve as investors seek avenues to manage their portfolio risk. Looking forward, we will continue to build on our multi-asset offering and increase our servicing and marketing efforts across our domestic and international client base. We will also strengthen our global network through strategic partnerships and alliances.”

Lastly, I have Venture, 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.”

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.