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 (among the top ten stocks) that have seen the highest net purchases in dollar value by institutional investors for the week ended 12 October 2018. They are: Chip Eng Seng Corporation Ltd (SGX: C29), Singapore Telecommunications Limited (SGX: Z74) and M1 Ltd (SGX: B2F).
Source: Singapore Exchange; SGX Stock Facts (as of 12 October 2018)
The company with the highest net acquisition by institutional investors last week was Chip Eng Seng, a company involved in property development and construction business. The company also owns a number of investment properties in Singapore and Australia that produces recurring income.
Chip Eng Seng delivered a positive earning update lately. For the second quarter ended 30 June 2018, revenue improved by 16.3% year-on-year to S$247.8 million. Furthermore, net profit jumped 546.6% year-on-year to S$16.2 million. The strong performance was driven by good performance from the company’s Property Development and Hospitality divisions.
Going forward, Chip Eng Seng provided the following guidance for its property development business:
On 5 July 2018, the Government announced that it had raised stamp duties and tightened lending limits on residential purchases in its bid to cool the property market and keep price increases in line with economic fundamentals. The immediate impact of the new measures was that muted responses were seen at the recent new residential launches.
Against the challenging market condition, the Group rolled out its new residential project at Woodleigh Lane – Park Colonial. The debut of this new project was well received which saw units sold hit 52.6% since launch. As regards Grandeur Park Residences, the number of units sold to-date moved up slightly to 96.4%. As the market sentiment has turned to less favourable, the Group will cautiously replenish its land bank in Singapore.
As of to-date, we have handed over all the townhouses and 97.7% of the sold apartments to the buyers. We expect all remaining units sold be handed to buyers in 3Q2018. For the South Melbourne project (known as Fifteen85), we had just launched the sales at the end of 2Q2018.”
On 5 October 2018, the company announced that seven of its biggest shareholders, including its founder Lim Tiam Seng and executive deputy chairman Lim Tiang Chuan, will be selling their shares to Celine Tang of Singhaiyi. The transaction was completed on 8 October 2018.
The other two companies with significant institutional buying last week were SingTel and M1. Together with StarHub Ltd (SGX: CC3), Singtel and M1 are our three main local telco.
Let’s begin with Singtel. In the company’s latest result for the quarter ended 30 June 2018, revenue was down 0.5% year-on-year to S$4.1 billion. EBITDA (earnings before interest, tax, depreciation, and amortisation) for the quarter declined 2.7% year-on-year to S$1.2 billion. Similarly, net profit declined 6.6% year-on-year to S$832 million. When we exclude exceptional items, underlying net profit declined 19.3% year-on-year to S$733 million. Underlying net profit fell due to weaker results from Airtel and Telkomsel, a reduced economic interest in NetLink NBN Trust, an increase in withholding taxes from higher dividends and adverse currency movements.
Ms Chua Sock Koong, Singtel’s group CEO, made the following comments on the quarter:
“This quarter’s results reflect the resilience of our core business against intense competition and increasing business headwinds. The Group continued to record data growth and Optus made gains in both the consumer and enterprise markets, bolstered by our quality networks, differentiated content and comprehensive ICT capabilities. Our overall focus on digitalisation and automation has also improved customer engagement and delivered productivity gains and cost savings.
We start the year with 23% of Group revenue from ICT and digital businesses and we expect contributions from these businesses to rise further as we continue to build capabilities in these new growth areas. Our digital marketing arm Amobee recently acquired the assets of Videology, an ad-tech platform provider for advanced TV and video advertising.”
As for M1, its latest earnings update was more positive compared to that of Singtel’s.
In M1’s 2018 second-quarter earnings update, the telco reported that sales revenue was up 1.7 % year-on-year to S$253.2 million. Service revenue was up 5.2% year-on-year to S$193.0 million. The growth in sales revenue was mainly driven by stronger performance in its Mobile Services and Fixed Services segments but offset by a weaker performance in its International Call Services and Handset Sales segments. M1’s EBITDA grew 1.4% year-on-year to S$78.4 million while net profit improved by 1.5% year-on-year to S$36.2 million.
Ms Karen Kooi, M1’s Chief Executive Officer, commented:
“M1 is committed to stay at the forefront of technology advancements and has embarked on early multi-vendor 5G trials, including Singapore’s first end-to-end 5G live trial in June 2018. This could provide insightful learning crucial to the successful development of relevant 5G services. With our foundation of dense cell grid and advanced narrow band Internet-of-Things network, we are well positioned to harness exciting new capabilities and support highly reliable and responsive applications on our network.
The Smart Nation initiatives will accelerate the digitalisation and transformation of businesses. By leveraging on our scaled up ICT and digital capabilities, we will be able to capture new opportunities from Smart Nation initiatives and support businesses to leverage digital technologies.”
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 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.