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…
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 list of the top 10 stocks that saw the highest net purchases in dollar value by institutional investors for the week ended 13 July 2018. They are: Singapore Telecommunications Limited (SGX: Z74), DBS Group Holdings Ltd (SGX: D05) and Genting Singapore PLC (SGX: G13)
Source: Singapore Exchange; SGX Stock Facts
The first company on my list, DBS, will need little introduction since it is the largest of the three major local banks in Singapore. DBS’s latest earnings update was for 2018’s first quarter. The bank had a good quarter, as its total income marched 16% higher from a year ago to a new record of S$3.36 billion.
Net interest income (the income from loan activities) grew 16% to S$2.12 billion, driven by an improvement in DBS’s net interest margin and loan volume growth. The bank’s net profit did even better, increasing by 26% to S$1.52 billion.
In DBS’s latest earnings update, its CEO Piyush Gupta shared some useful comments on the state of the bank’s business:
“With interest rates and allowance charges reverting to more normalised levels, and our capital base streamlined with the finalisation of regulatory requirements, the structural profitability of our franchise has been more clearly demonstrated with this quarter’s results. While we are keeping a watchful eye on how geopolitical trade tensions play out, the region’s economic fundamentals remain sound. Our pipeline is healthy and we expect to continue capturing business opportunities and delivering shareholder returns in the coming year.”
Singtel is a company that also 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.
Last but not least, Genting Singapore is the operator of one of Singapore’s tourism landmarks, the integrated resort, Resorts World Sentosa. Among the resort’s many attractions are one of Singapore’s two casinos, and the Universal Studios Singaporetheme park.
In its latest earnings update – for the first quarter of 2018 as well – Genting Singapore announced that its revenue grew by 15% year-on-year to S$675.1 million. This drove an 8% increase in operating profit (to S$281.8 million), and a 3% uptick in net profit (to S$217.2 million). The improvement in the company’s revenue was driven by both its gaming and non-gaming businesses. Moreover, if a one-off gain of S$96.3 million that was recorded in 2017’s first quarter (due to the sale of Genting Singapore’s stake in an integrated resort project based in Korea) was removed, the company’s profit would have increased by 91% year-on-year in 2018’s first quarter.
One of Genting Singapore’s important future growth drivers is the potential to open an integrated resort in Japan. Here’s what the company shared about its plans on the matter in its latest earnings update:
“We are pleased that the Integrated Resorts (“IR”) Implementation Bill has been submitted to the Japan Diet for debate on 27 April, and debate on this bill will commence within the appropriate time frame this year. The progress for the establishment of IRs in Japan has been very encouraging. We are excited at this opportunity to be a partner for the development of the tourism industry in Japan. In this regard, we are actively preparing for the ensuing bidding exercise by the respective government authorities.”
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. The Motley Fool Singapore has a recommendation for DBS Group Holdings.