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 for the week ended 24 August 2018. They are: CapitaLand Commercial Trust (SGX: C61U), Genting Singapore PLC (SGX: G13) and Thai Beverage Public Company Limited (SGX: Y92).
Source: SGX; SGX StockFacts (as of 24 August 2018)
We will begin with CapitaLand Commercial Trust (SGX: C61U) or CCT. As a quick introduction, CCT is one of the largest commercial real estate investment trusts (REITs) in Singapore by market capitalisation. The REIT has ownership over 10 commercial properties in Singapore and one property in Germany.
In the latest quarter ended 30 June 2018, CCT reported that revenue was up 12.0% year-on-year to S$98.0 million. Similarly, net property income (NPI) grew 12.5% year-on-year to S$77.7 million. The strong performance was driven by contributions from Asia Square Tower 2 and CapitaGreen, offset by the divestments of One George Street (50% interest), Wilkie Edge and Golden Shoe Car Park. Yet, distribution per unit (DPU) declined 4% year-on-year to 2.16 cents mainly due to enlarged units base.
As of 30 June 2018, CCT’s gearing and occupancy rate stood at 37.9% and 97.8%, respectively.
In terms of outlook, CCT commented the following:
“Based on data from CBRE Pte. Ltd., Singapore’s average monthly office rent was S$10.10 per square foot in 2Q 2018, an increase of 4.1% quarter-on-quarter. Market occupancy rate was 94.1%, unchanged from 1Q 2018. Consultants expect market rents to continue growing in 2019 given limited new supply in Singapore Central Business District. In relation to CCT, the rise in market rents will narrow the gap between committed and expiring rents for its leases due for renewal in 2018 and 2019.
Frankfurt’s prime office rent market has been resilient through property cycles. With the relatively low new supply completing in 2018 and 2019, along with good pre-letting levels, the prime office rents in the city should be well-supported and expected to grow.”
Next, Genting Singapore is the operator of the integrated resort, Resorts World Sentosa. Among the resort’s many attractions are one of Singapore’s two casinos and the Universal Studios Singapore theme park.
For its latest quarter, Genting Singapore announced that revenue was down by 6% year-on-year to S$560.3 million while operating profit improved by 1% year-on-year to S$228.4 million. Similarly, net profit grew by 3% year-on-year to S$177.6 million. Segment wise, gaming revenue declined by 8% year-on-year to S$406.1 million. On the other hand, non-gaming revenue was up by 1% year-on-year to S$153.5 million.
The group also provided some updates on its plan to set up an integrated resort in Japan. Here’s what the company shared about the project:
“In Japan, the anticipated Integrated Resorts (“IR”) Implementation Bill was enacted by the Japanese Diet on 20 July. The Group has been gearing up for this expansion opportunity and has been hiring a new team of Japanese nationals in different disciplines to prepare for the bid.”
Last but not least, Thai Beverage is a conglomerate operating in four different segments, namely, Spirits, Beer, Food, and Food Beverages.
For the quarter ended 30 June 2018, Thai Beverage reported that revenue was up 34.1% year-on-year to THB 60.7 billion while net profit dropped 56.5% year-on-year to THB 6.6 billion. Excluding one-off items, net profit would have dropped by 1.4% instead. EBITDA (earnings before interest, tax, depreciation and amortization) for the quarter declined by 39.2% to THB 10.8 billion. Excluding non-recurring event, EBITDA would have improved by 16.7% year-on-year.
As of 30 June 2018, the company had THB 235.3 billion in total debt, and THB 13.0 billion in cash and cash equivalents, translating to a net debt position of THB 222.2 billion. In contrast, at the end of September 2017, the company had THB 30.7 billion in net debt while in March 2018, it had a net debt position of THB 214.1 billion.
Thai Beverage also shared its observation of the market conditions:
“During April 2018 – June 2018, the Thai economy was driven mainly by exports and tourism sector. Public spending and private investment have also expanded. Meanwhile, headline inflation increased from previous quarter because of an increase in energy price.
Household income was likely to recover but household expenditure mostly came from high income household, while the purchasing power of middle to low-income people remain weak, although the income levels of some farmers in certain regions did improve. As such, private consumption by households in Bangkok and its vicinities has increased, while spending in other regions has slow down.
Household debt has risen significantly and remains at high levels, thereby pressuring the consumers to be even more cautious with their spending. Given these Thai economic fundamentals, the domestic beverage industry continued to face challenges during the quarter.”
The Foolish conclusion
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. Motley Fool Singapore has a recommendation for CapitaLand Commercial Trust.