May 21

[SG] 3 Stocks with Management eating their own cooking

Despite US Tech stocks and cryptocurrencies taking up all the attention as COVID-19 raged on, there are some companies with steadily increasing financials and reasonable valuations which investors may have missed out on.

On that front, astute directors within these companies seem to feel that their companies are undervalued and have snapped up more shares for themselves. As Peter Lynch always say…

Insiders can sell for many reasons but they only buy for 1 – its undervalued.

Hence, this is usually considered a positive sign for the company as the directors have faith in the future performance of the company.

We have scoured SGX and found 3 stocks that have the management eating their own cooking in the past few months.

Stock #1 – Nanofilm Technologies International

NanoFilm is founded in 1999 as a high-tech spinoff from Nanyang Technological University, specializing in advanced materials and nanoproducts. Its proprietary materials with special surface properties and nano-engineering capabilities, customized to our customers needs, have redrawn market boundaries with limitless potential.

As of its annual report, Nanofilm’s revenue increased by a remarkable 52.8% to $218.33 million. Its net profit increased 68.1% to $58.06 million.

Free cash flow was negative as the company focused on expanding its capabilities through acquiring more assets. Cash balance of the company was at a healthy and sustainable level of $226.5 million after the listing.

On March 2, SMALLCAP World Fund increased its direct interest in Nanofilm Technologies International to above the substantial shareholder threshold, from 4.87 per cent to 5.09 per cent.

The acquisition of the 1,774,800 shares, transacted at S$5.02 per share, had a consideration of S$8,909,496. This increased the total deemed interest of The Capital Group Companies in Nanofilm Technologies from 5.99 per cent to 6.26 per cent.

Nanofilm last closed at $4.91 which values it at a P/E ratio of 55x. It did not announce dividends for the previous Fiscal year.

Stock #2 – First Sponsor Group

First Sponsor group was listed on the Mainboard of Singapore Exchange Securities Trading Limited on 22 July 2014.

It has 3 operating segments namely property development, property holding and property financing. It is backed by 2 strong shareholders Hong Leong Group and Tai Tak Holdings.

As of its annual report, First Sponsor’s revenue decreased by 36% to $203.9 million. Its net profit decreased by 38% to $101.1 million.

Free cash flow came in at a positive $164 million. As a result, cash balance of the company increased to $476 million.

Between March 5 and 8, First Sponsor Group non-executive chairman Calvin Ho Han Leong acquired 533,000 shares of the company for a consideration of S$752,883.

At an average price of S$1.41 per share, this increased his total interest in the property development, property holding and property financing company from 46.14 per cent to 46.20 per cent.

This followed Mr Ho’s acquisition of 496,900 shares at S$1.39 per share between Feb 6 and March 1.

Appointed as the non-executive chairman of the company in April 2015, Mr Ho had served as the non-executive vice-chairman of the company since October 2007.

First Sponsor last closed at $1.40 which values it at a P/B of 0.7x and a dividend yield of 2.3%.

Stock #3 – Frencken Group

Frencken provide comprehensive Original Design, Original Equipment and Diversified Integrated Manufacturing solutions.

It has presence all across the world and boasts world-class MNCs in the automotive, analytical & life sciences and semiconductor industries as its customers.

As its latest annual report, Frencken’s revenue decreased by 5.8% to $620.6 million. Its net profit however increased slightly by 1.1% to $43.06 million. Cash flow from operating activities came in at $55.9 million. Cash balance of the company increased to $151.1 million.

On March 8, Frencken Group chairman and non-executive non-independent director Gooi Soon Chai acquired 100,000 shares of the company for a consideration of S$120,000.

This increased his total interest in the global integrated technology solutions business from 23.32 per cent to 23.34 per cent.

Frencken last closed at $1.63 which values it at a P/E of 15x and a dividend yield of 1.9%.

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Tags

first sponsor, frencken group, insider trading, nanofilm, SGX, share buyback


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