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 among the top 10 shares that saw the highest net purchases in dollar value by institutional investors in the week ended 26 October 2018. They are: Singapore Press Holdings Limited (SGX: T39), Singapore Telecommunications Limited (SGX: Z74) and M1 Ltd (SGX: B2F).
Source: Singapore Exchange; SGX Stock Facts
As a quick introduction, Singapore Press Holdings is a publisher of major newspapers in Singapore, such as The Straits Times and The Business Times. The company is also in the real estate business and other activities such as online portals and events management. As part of the companies’ real estate arm, it is the majority owner and manager of SPH REIT (SGX: SK6U), a real estate investment trust which owns retail malls in Singapore.
For its financial year ended 30 September 2018 (FY2018), Singapore Press Holdings reported a 4.8% decline in revenue to S$982.6 million, and a 19.7% fall in net profit attributable to shareholders to S$281.1 million. There was a 13% increase in digital revenue to S$103.0 million within the Media business, but the segment’s overall revenue still fell by 9.6% to S$655.8 million because of a double-digit decline in print-ad revenue.
The sharp decline in Singapore Press Holdings’ net profit was partly due to the absence of a one-off gain on the sale of a joint venture that was recorded in FY2017; excluding one-offs, the company’s net profit attributable to shareholders in FY2018 would have increased by 2.4% over FY2017. Singapore Press Holdings proposed a final dividend of S$0.07 per share for FY2018. Together with an interim dividend of S$0.06 per share, the company’s total dividend for FY2018 is S$0.13 per share, 13% lower than in FY2017.
As of 30 September 2018, Singapore Press Holdigs had S$1.61 billion in borrowings, and S$935.1 million in cash and investments.
Here’s some commentary that Singapore Press Holdings gave in its latest earnings update regarding its recent business developments:
“In early September 2018, SPH made its maiden investment in the Purpose-Built Student Accommodation (PBSA) sector with a $321 million acquisition of 3,436 beds across 6 towns and cities in the UK. To drive its efforts in the UK, SPH invested in building a core asset management team in early 3Q2018 and partnered Host, a 2018 award-wining student housing management specialist to actively manage the portfolio. The acquisition is part of a strategy to expand the Group’s asset management business to acquire cash-yielding assets in multiple defensive sectors. The Group will build upon its initial PBSA acquisition to develop a sizeable platform with strong domain expertise
and on-ground capabilities, and may also enter other sectors in time.
In September, SPH announced that it will join Keppel Corporation (SGX: BN4) in making a preconditional general offer for M1. As part of this, SPH will roll-over its existing 13.45% stake in M1 into the offeror, Konnectivity Pte Ltd which is majority-held by Keppel. There is potential for long term value creation in M1 from the growth and business transformation initiatives to be undertaken post close of the offer.”
Up next is Singtel, Singapore’s largest telco. The company’s latest earnings update, for the first quarter of its fiscal year ending 31 March 2019 (FY2019), was released in August 2018 (Singtel’s next earnings update is due on 8 November 2018). For the reporting quarter, Singtel’s revenue was down 0.5% year-on-year to S$4.1 billion. EBITDA (earnings before interest, taxes, depreciation, and amortisation) for the quarter slipped by 2.7% to S$1.2 billion and similarly, net profit declined by 6.6% year-on-year to S$832 million.
Excluding exceptional items, Singtel’s underlying net profit declined 19.3% year-on-year to S$733 million because of the following: Weaker results from Airtel and Telkomsel, which are two of Singtel’s regional associates; reduced economic interest in NetLink NBN Trust (SGX: CJLU) following its spin-off from Singtel in July 2017; an increase in withholding taxes from higher dividends; and adverse currency movements.
For the whole of FY2019, Singtel expects revenue from its core business to grow in a “low single digit” range, and for EBITDA “to be stable.” It also expects free cash flow (excluding spectrum payments and dividends from its associates) of S$1.9 billion for the year; dividends from its associates are expected to hit S$1.4 billion.
Singapore’s smallest operational telco, M1, is the third in my list. In its 2018 third quarter earnings update, M1 reported that its revenue for the quarter was up 10.1 % year-on-year to S$274.6 million because of stronger performances in the Fixed Services and Handset Sales businesses that offset weaker performances from the International Call Services and Mobile Telecommunication businesses. Despite the higher revenue, M1’s net profit attributable to shareholders fell by 5.3% to S$34.4 million in 2018’s third quarter.
In its latest earnings update, M1 gave a very brief statement on its outlook:
“M1 continues its transformation to a Smart Communications Provider to compete in the converged digital economy.”
As mentioned earlier, two of M1’s major shareholders – Keppel Corporation and Singapore Press Holdings – had made a collective offer in September to acquire shares of M1 that they do not yet control.
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.