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Institutional Investors Have Been Selling These 3 Stocks

There are many ways to find investment ideas. Some useful ways 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 (among the top ten stocks) that have seen the highest net disposal in dollar value by institutional investors in for the week ended 22 June 2018. They are: Singapore Telecommunications Limited (SGX: Z74), CapitaLand Limited (SGX: C31) and StarHub Ltd (SGX: CC3).

Source: Singapore Exchange; SGX StockFacts

From the above, we can see that two of the three local telecoms (with the exception of M1 Ltd (SGX: B2F)) have been sold off by institutional investors.

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.

Similarly, Starhub reported a weaker quarterly earnings update. For the quarter ended 31 March 2018, revenue was down 4.7% year-on-year to S$561.0 million. Service revenue was down 1.4% year-on-year to S$450.8 million. Likewise, operating profit was down 12.0% year-on-year to S$81.9 million while profit attributable to investors was down 14.9% year-on-year to S$ 61.5 million. The weaker performance was mainly driven by lower revenue in Mobile and Pay TV segments. As of 31 March 2018, net debt stood at S$684.6 million and debt-to-EBITDA ratio stood at 1.09. Starhub proposed a dividend per share of 4 cents in the quarter, unchanged from a year ago.

The company commented:

“Enterprise Fixed has been a constant bright spot with a third successive quarter of double-digit revenue growth. In line with our plan to grow the business, we will continue to roll out new robotics, digital platforms and cyber security solutions to support Singapore’s Smart Nation vision.

We have also announced a partnership with a mobile virtual network operator as part of our overall mobile strategy. This gives us the ability to offer customers more choices, better address customer segment needs and grow our mobile business amid the evolving landscape.”

Another company whose shares was sold by institutional investors lately is CapitaLand. As a quick introduction, CapitaLand is a real estate developer and owner and is one of the largest companies in Singapore’s stock market. Its diversified global real estate portfolio includes integrated developments, shopping malls, serviced residences, offices and homes.

In the latest quarter ended 31 March 2018, CapitaLand reported that revenue was up 53.3% year-on-year or S$478.0 million to S$1,375.5 million. Earnings before interest and tax increased 15.1% year-on-year. The increase was mainly due to “higher operating contributions from development projects, commercial, retail and serviced residence businesses, higher portfolio and revaluation gains, as well as a net writeback of provision for foreseeable losses.” Yet, profit after tax and minority interest fell 18.8% year-on-year due to the absence of disposal gain in the latest quarter.

Lim Ming Yan, president and chief executive of CapitaLand, commented:

 “CapitaLand is on track to achieve our annual S$3-billion capital recycling target while we explore investment opportunities across asset classes. In 1Q 2018, we continued to optimise our portfolio by divesting 20 retail assets in China. This was followed by the proposed acquisition of Pearl Bank Apartments in Singapore and a site for our first integrated development in Vietnam. We also successfully set up our second commercial fund in the country, the US$130-million CapitaLand Vietnam Commercial Value-Added Fund, as part of growing our fee-based business.”Last but not least, Venture Corporation is an electronics manufacturing services provider with expertise in a wide range of activities.

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.