By Say Cheong //
December 18, 2020

Insider buybacks can be a good way to demonstrate confidence in his own company. This is because these directors know the ins and outs of the company’s operations as an ‘insider’.

When the person has a front view seat of how the company will fare in the long term and takes up a stake in that ‘belief’, investors should pay attention to these insider transactions.

On that front, we have scoured 3 small cap gems where directors have been purchasing the company’s shares.

#1 UOB Kay Hian

UOB-Kay Hian is a regional financial services Group headquartered in Singapore. In Singapore, they are the largest domestic broker based on the number of registered trading representatives employed.

In addition to broking agency services, they also provide high value added services in corporate advisory and fund raising, leveraging its wide network of corporate contacts to execute IPOs, secondary placements and other corporate finance and investment banking activities.

As its latest annual report, UOB Kay Hian’s revenue decreased by slightly less than 1% to $372.7 million. Its net profit decreased slightly by 8.6% to $69.3 million.

Free cash flow came in at a negative $38.4 million.  Cash balance of the company remains at a healthy value of $448.3 million.

Since 25th August 2020 (after a lapse of 2 months), UOB Kay Hian’s Chairman and Managing Director Wee Ee Chao increased his interest from 30.58% to 30.78% as of 15 Dec 2020.

In total, the acquisitions were more than 1.7 million shares between the range of $1.24 – $1.42 per share. The transactions were done through the open market as well.

UOB Kay Hian last closed at $1.41. It values the company at a P/E ratio of 10x and dividend yield of 2.98%.

#2 Lum Chang Holdings Limited

Lum Chang has evolved and expanded its businesses to include property development, investment and interior finishing works. The group has presence and office in Singapore and Malaysia.

As its latest annual report, Lum Chang’s revenue increased by 34% to $322.7 million. Its net profit came in negative for the full the full year due to other losses.

Free cash flow came in at $94 million. As a result, cash balance of the company increased to a level of $150.4 million.

Between September 15 and 18, Lum Chang’s executive chairman Raymond Lum acquired 1,658,000 shares of the listed company for a consideration of S$580,300 at an average price of $0.35 per share.

On top of that, MD David Lum have also done a series of insider purchases – increasing his stake from 21.63% to 22.07%. His purchase price ranges from S$0.35 to S$0.38.

Lum Chang last closed at $0.38 which gives it a dividend yield of 3.4%. P/E ratio is not meaningful as its has suffered from losses the past year.

#3 Hanwell Holdings Limited

Hanwell is a distributor of food essentials such as rice, oil, etc. Some of its popular brands include Golden Circle oil, Topseller, Royal Umbrella rice sacks, etc. It has a presence in China, Malaysia, Singapore, and Japan.

As its latest annual report, Hanwell’s revenue decreased slightly by 8.1% to $461.1 million. Its net profit decreased by 46.7% to $11.8 million.

Free cash flow came in at a $32.87 million. Cash balance of the company was at a sustainable $121.99 million.

On September 8 – 24, Hanwell’s CEO Tang Cheuk Chee acquired 6.8 million shares of the stock at an average of $0.28 cents per share. This increased his total interest in the stock to 19.58%.

Moreover, Mr. Sam Goi Seng Hui also known as Singapore’s “Popiah King” started buying Hanwell’s shares and increased his stake from 19.34% to 20.03% as of 28 Oct 2020.

Hanwell last closed at $0.28, which values it at a P/NAV ratio of 0.5x and dividend yield of 0.8%.

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