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.
IIn this article, I will look at three Singapore stocks that were in the list of the top 10 stocks that saw the highest net sales in dollar value by institutional investors for the week ended 12 October 2018. They are: Genting Singapore PLC (SGX: G13), Singapore Exchange Limited (SGX: S68), and DBS Group Holdings Ltd (SGX: D05).
Source: Singapore Exchange; SGX Stock Facts
First up, we have Genting Singapore. As a quick introduction, Genting Singapore is the operator of the integrated resort, Resorts World Sentosa in Singapore. Among the resort’s many attractions are one of Singapore’s two casinos and the Universal Studios Singapore theme park.
In its latest earnings update – for the second quarter of 2018 – Genting Singapore announced that its revenue fell by 6% year-on-year to S$560.3 million. The Gaming segment’s revenue was down by 8% to S$406.1 million, while the non-gaming segment experienced a 1% increase in revenue to S$153.5 million. Despite the lower overall revenue, there was a 1% increase in operating profit (to S$228.4 million), and a 3% increase in net profit (to S$177.6 million) for Genting Singapore. The improvement in the company’s profit was due to currency gains on its investments.
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:
“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.”
Next, there’s Singapore Exchange. As a quick background, the company is the only stock exchange in Singapore, and has three business lines, namely, Equities & Fixed Income, Derivatives, and Market Data & Connectivity.
For the quarter ended 30 June 2018 (which is the fourth quarter of the company’s fiscal year ended 30 June 2018), Singapore Exchange’s revenue grew by 2.5% to S$213.0 million, but operating profit declined slightly by 1.3% to S$98.1 million. Similarly, its net profit slipped by 1.8% to 83.7 million. However, a final dividend of S$0.15 per share was declared, a 15.4% increase from the dividend of S$0.13 per share declared a year ago.
The following are salient comments that Singapore Exchange shared about its outlook in its latest earnings update:
“Looking forward, the prospect of escalating trade tensions and moderating global growth may result in higher market volatility, and in turn, greater demand for risk management solutions. We will continue to support our customers in managing their risks across different asset classes through our suite of products, and introduce new derivatives tools such as FlexC FX futures and enhanced Titan OTC Pro platform in the year ahead. Our FX derivatives business continues to grow strongly and now represents 5% of total financials and commodities derivatives gross revenues. We expect this business to contribute positively to net profit in the next few years.
Cementing our position as a multi-asset exchange remains key to our strategy, together with growing our international presence and widening our partnerships and networks. The introduction of new equities products and services, enhancement of SGX Bond Pro, expansion of our steel value chain and development of new data business capabilities, will all play a part towards fulfilling this strategy in FY2019.
We also see an opportunity to develop a digital marketplace in the global freight industry, building on the strengths of Baltic Exchange and our commodity franchise.
FY2019 operating expenses are expected to be between $445 million and $455 million, and technology-related capital expenditure to be between $60 million and $65 million.”
Last on the list is DBS Group. Though its shares face significant sell-off by institutional investors lately, DBS Group has performed well in its latest quarter earnings update.
Lastly, I have DBS Group, Singapore’s largest bank by total assets. Despite the recent sales of DBS Group’s shares by institutional investors, the bank actually reported a good set of results in its latest quarterly earnings update.
In 2018’s second quarter , DBS Group experienced a 10% year-on-year increase in total income (a bank’s revenue) to S$3.20 billion. Net interest income (income from borrowing-related activities) grew 18% to S$2.22 billion, driven by an improvement in net interest margin and loan volume growth. Meanwhile, net fee income increased 11% to S$706 million, led by growth in the wealth management and cards businesses. As a result, DBS Group’s net profit jumped 18% to S$1.33 billion. DBS Group also declared an interim dividend of S$0.60 per share, up 82% from the dividend of S$0.30 per share seen a year ago.
DBS Group’s CEO, Piyush Gupta, said in the bank’s latest earnings update that “the region’s prospects remain intact,” despite the presence of “gathering clouds.” He added that the region’s prospects should enable DBS Group to “continue capturing growth opportunities and generating stronger shareholder returns in the coming quarters.”
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 recommendations on Singapore Exchange and DBS Group.