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 30 November 2018. They are: Singapore Telecommunications Limited (SGX: Z74), Keppel Corporation Limited (SGX: BN4) and Wilmar International Limited (SGX: F34).
Source: Singapore Exchange; SGX StockFacts
The first company that saw its shares sold off by institutional investors is our biggest local teleco, Singtel.
In the latest quarter ended 30 September 2018, Singtel reported flat revenue of S$4.3 billion for FY2019’s second quarter. Yet, EBITDA (earnings before interest, taxes, depreciation, and amortisation) for the quarter declined by 10.3% year-on-year to S$1.13 billion.
Singtel’s share of associates’ pre-tax earnings was also down by 49% year-on-year to S$330 million, excluding exceptional items. Consequently, Singtel’s net profit declined by 76.6% to S$667 million. Even if one-off gains and expense were removed, the telco’s underlying net profit would still be down by 21.8% year-on-year to S$715 million on the back of weaker performances in Singtel’s core businesses, and the aforementioned fall in associates’ earnings.
Nonetheless, Singtel managed to declare an interim dividend of S$0.068 per share for the reporting quarter, unchanged from a year ago.
The next company that saw its shares sold off by institutions recently is Keppel Corp. As a quick introduction, Keppel Corp is a conglomerate with major business segments that include Offshore & Marine, Property, Infrastructure, and Investments.
For the third quarter of 2018, Keppel Corp reported that its revenue fell by 19.9% year-on-year to S$1.30 billion. Similarly, operating profit declined by 8.9% year-on-year to S$270.4 million. As a result, Keppel Corp’s net profit attributable to shareholders slid 14.9% to S$225.67 million.
Keppel Corp’s revenue declined mainly because of a lower revenue from the Property segment; lower property trading activities took place in Singapore, China, and Vietnam. Meanwhile, a fall in contributions from the Investments and Property segments were big culprits for Keppel Corp’s lower profit in the third quarter of 2018. Stronger performances in the Infrastructure and Offshore & Marine divisions provided some offset. Despite lower profitability, Keppel Corp managed to improve its balance sheet on a year-on-year basis: The conglomerate’s net debt declined from S$6.25 billion a year ago to S$4.84 billion.
The last company with significant net selling by institutional investors is Wilmar. As a quick introduction, Wilmar is an agricultural company that operates through four main segments: Tropical Oil, Oilseeds and Grains, Sugar, and Others.
For the quarter ended 30 September 2018, Wilmar reported that revenue increased by 4.3% to US$11.6 billion. Net profit grew by 10.7% to US$407.4 million. This was driven by stronger performance in the Tropical Oil, and Oilseeds and Grains segments, and higher contribution from associates and joint ventures. Year-to-date, the group generated US$1.65 billion in net cash flow from operating activities, resulting in free cash flow of US$773.4 million.
Kuok Khoon Hong, chairman and chief executive of Wilmar, commented the following in the company’s earnings press release:
“Performance of the new processing plants we have invested in the past years, especially in China, Indonesia and India, continues to improve and this has helped us achieve the current good set of results. We expect most of our operations to continue to do well in the coming quarter, due to generally better processing margins. Overall, we are cautiously optimistic that performance for the rest of the year will be satisfactory.”
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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.