There are many ways to find investment ideas. You can screen for stocks, or 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 have 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…
There are many ways to find investment ideas. You can screen for stocks, or 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 have 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.
Today, I want to look at three Singapore stocks (among the top 10 stocks) that have seen the highest net disposal in dollar value by institutional investors for the week ended 12 April 2019. They are: DBS Group Holdings Ltd (SGX: D05), Genting Singapore Ltd (SGX: G13), and United Overseas Bank Ltd (SGX: U11).
Sources: Singapore Exchange; SGX Stock Facts
Institutional investors have been net sellers of bank stocks in the past week. Despite such a sell-off by these investors, the banks have actually delivered rather strong financial performances for 2018.
1. DBS Group
For the full year ended 31 December 2018, DBS Group reported that income grew by 11% from a year ago to S$13.2 billion. Net interest income (income from loans) improved by 15% year on year to S$9.0 billion, driven by improvement in net interest margin and loan volume growth. As a result, net profit jumped 28% to a record S$5.6 billion as a result of higher income, as well as lower allowances.
DBS Group proposed a final dividend of S$0.60 per share for the quarter. Including the interim dividend, the total dividend per share (DPS) in 2018 would be S$1.20, down from S$1.43 in 2017 (including a special dividend of S$0.50).
DBS CEO Piyush Gupta said:
“We achieved financial results befitting our fiftieth anniversary, a year when we were also recognised as the world’s best bank and best digital bank. Return on equity of 12.1% was near the historical high of 2007, when interest rates were twice the levels today and capital requirements less stringent. The structural improvements we have made to the profitability of our franchise — a shift towards higher-returns businesses, deeper customer relationships and more nimble execution — put us in good stead to navigate the challenges of the coming year.”
2. Genting Singapore
The other company that saw its shares sold off by institutional investors is Genting Singapore, the operator of the integrated resort Resorts World Sentosa. Among the resort’s many attractions are one of Singapore’s two casinos and the Universal Studios Singapore theme park.
For the year ended 31 December 2018, Genting Singapore announced that revenue was up by 6% year on year to S$ 2.5 billion, while operating profit improved by 9% year on year to S$975.2 million. Similarly, net profit grew by 10% year on year, to S$755.4 million. The improvement in profitability was driven by stronger performance across both gaming and non-gaming segments.
The group also provided an outlook for the year 2019:
“In this financial year 2019, we are cautious of the ambiguous economic environment and on-going geopolitical friction that is clouding the growth of the Asian gaming and tourism market. The Group will continue to refine our marketing focus to those markets that will produce respectable returns in our invested resource. With increase in competition from newly opened gaming facilities, as well as aggressive marketing tactics, we continue to improve our customer experience.”
3. United Overseas Bank
Similarly, UOB delivered a stronger performance in 2018. Total income grew by 6% year on year to S$9.1 billion. Net interest income (income from loans) grew 13% year on year to S$6.2 billion, driven by improvement in net interest margin and loan volume growth. Higher total income as well as lower allowances resulted in higher net profit of 18% year on year to a record S$4.0 billion.
UOB proposed a final dividend per share of S$0.50 and a special dividend of S$0.20 for the quarter. Including the interim dividend per share of S$0.50 paid, the total dividend per share would be S$1.20 for 2018, an increase of 20% over last year.
Wee Ee Cheong, UOB’s Deputy Chairman and Chief Executive Officer, commented on the bank’s outlook:
“As global uncertainties persist in 2019, we will stay disciplined in pursuing sustainable growth, while maintaining a risk-focused approach and equipping our people for the future. As a long-term player with deep knowledge of and an extensive presence that connects Southeast Asia, we are best positioned to ride on the region’s immense growth potential.
For our customers across the region, we will continue to invest in our omni-channel capabilities and to forge ecosystem partnerships, such as our recent ones with Prudential and Grab, in providing innovative and relevant solutions. Starting in Thailand, we will also deepen engagement with ASEAN’s massive base of ‘mobile first’ and ‘mobile only’ customers through our Digital Bank.”
The Foolish bottom line
Looking at what institutional investors are doing can 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 recommends Oversea-Chinese Banking Corp Limited, United Overseas Bank Ltd, and DBS Group Holdings Ltd.