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Institutional Investors Sold These Blue-Chip Shares In November

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 November 2018. They are: Singapore Telecommunications Limited (SGX: Z74), Sembcorp Industries Limited (SGX: U96) and SATS Ltd (SGX: S58).

Source: Singapore Exchange; SGX StockFacts

The first company that saw its shares sold off in November by institutional investors is our biggest local telecom – 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.

Singtel declared an interim dividend of 6.8 cents per share during the quarter, unchanged from a year ago.

The next company that saw its shares sold off by institutions is Sembcorp Industries.

As a quick introduction, Sembcorp Industries is a conglomerate with three major business segments: Utilities; Marine; and Urban Development & Others. The Marine segment’s contribution mainly comes from Sembcorp Industries’ 61% ownership stake in Sembcorp Marine Ltd (SGX: S51).

For the quarter ended 30 September 2018, Sembcorp Industries’ revenue improved by 36% year-on-year to S$3.0 billion. Yet, profit from operations for the quarter declined by 29% year-on-year to S$216.5 million, driven mainly by weaker performance in the Marine segment. Consequently, net profit for the quarter fell 12% year-on-year to S$82.3 million. Sembcorp Industries’ net debt stood at S$8.9 billion as at 30 September 2018.

Here’s a brief comment by Sembcorp Industries on its outlook:

“The market environment is expected to remain challenging for the rest of the year. While a broader-based global recovery is underway, downside risks to global growth have risen amidst rising trade and geopolitical challenges. The Group remains confident that it has the right strategies and capabilities for the future.”

The other company with significant net selling by institutional investors is SATS Ltd.

As a quick introduction, SATS is a company providing food solutions and gateway services solutions. The Food Solutions covers airline catering, food distribution, and industrial catering whereas Gateway Solutions is involved in ground handling services of passengers, flights and cargo.

For the quarter ended 30 September 2018, SATS reported that revenue was up by 4.2% year-on-year to S$453.1 million. Similarly, operating profit improved by 8.0% to S$66.0 million, driven mainly by higher revenue and better operating margin. Underlying net profit for the quarter was up 0.8% year on year to S$65.7 million, after stripping out a one-time S$7 million gain recorded a year ago from the sale of assets. As at 30 September 2018, SATS had a strong balance sheet of S$281.7 million in cash and S$96.4 million in debt.

Here’s what the company said about its outlook:

In the near term, trade tensions and weakening sentiment are impacting emerging market currencies and trade volumes. At the same time, higher oil prices and competition in the airline industry will continue to result in pricing pressures on SATS.

Notwithstanding the short-term challenges, with aviation volumes and demand for safe, quality food set to increase, SATS intends to pursue organic and inorganic growth opportunities. SATS will also continue to invest in people and technology to digitalise services, enhance culinary capabilities, and improve productivity.”

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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 SATS Ltd.