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 sniff out potential bargains. Studying what institutional investors have been buying or selling is another way.
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 when researching stocks than individual investors like you and me. 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 ten stocks) that have seen the highest net purchases in dollar value by institutional investors for the week ended 22 February 2019. They are: Keppel Corporation Limited (SGX: BN4), Singapore Exchange Limited (SGX: S68), and SATS Ltd (SGX: S58).
Source: Singapore Exchange; SGX Stock Facts
1. Keppel Corporation
The company with the highest net acquisition by institutional investors was Keppel Corporation, a conglomerate with major business segments including offshore and marine, property, infrastructure, and investment.
For the quarter ended 31 December 2018, Keppel reported that revenue was up 8.5% year on year to S$1.7 billion. Yet, profit from operations fell by 96.5% to S$5.1 million, driven mainly by higher operating cost. Despite lower operating profit, net profit attributable to shareholders for the quarter improved from a loss of S$492.0 million last year to a profit of S$145.3 million. The higher profitability in the quarter is mainly due to the absence of one-off costs incurred in the previous year.
Keppel’s net debt grew from S$5.5 billion as of 31 December 2017 to $5.6 billion as of 31 December 2018. Lastly, the conglomerate proposed a final dividend of S$0.15 per share. Together with the interim dividend paid, the total dividend per share for 2018 would be S$0.30.
Loh Chin Hua, CEO of Keppel Corporation, commented:
“Against a volatile backdrop, 2018 was a transformational year for Keppel, as we continued to reinvent and position ourselves for long-term growth.
Notwithstanding the challenging macro environment, urbanisation trends continue to present many exciting long-term opportunities for Keppel, whether it is providing energy, property, environmental solutions or connectivity. We will remain focused on building a nimble and agile Keppel, ready to seize opportunities in our existing businesses even as we grow new engines for the future.”
The second company with significant institutional buying last month was Singapore Exchange, or SGX — the only stock exchange in Singapore. The company has three business lines, namely equities & fixed income, derivatives, and market data & connectivity.
For the quarter ended 31 December 2018, Singapore Exchange’s revenue grew by 9.3% year on year to S$224.2 million. Operating profit was up by 10.4% year on year to S$113.7 million. Consequently, net profit attributable to shareholders improved by 9.2% to S$96.5 million. Similarly, Singapore Exchange’s diluted earnings per share were up by 9% at S$0.09. An interim dividend of S$0.075 per share was declared, 50% higher than the S$0.05 per share dished out a year ago.
Loh Boon Chye, chief executive of Singapore Exchange, commented on the latest results:
“We achieved a second consecutive quarter of record performance in our derivatives business, with robust institutional demand for our risk management and hedging tools, including our MSCI Net Total Return index futures and FX futures contracts. Meanwhile, investor sentiment was dampened by concerns on slower global economic growth and escalating trade tensions, which led to lower activity in our securities business along with other regional markets. Notably, we are seeing increased interest in our securities products such as our new single stock daily leverage certificates, as investors seek out more investment opportunities.”
The other company with significant institutional buying last month was SATS, a company providing food solutions and gateway services solutions.
For the quarter ended 31 December 2018, SATS reported that revenue was up by 5.5% year on year to S$464.0 million. Operating profit was down marginally by 0.6% to S$65.3 million, mainly due to higher expenditures. Associates and joint venture’s profit after tax contribution jumped by 51.1% to S$20.7 million, driven by stronger performance in gateway services and offset partially by weaker performance in food solutions. Similarly, net profit attributable to shareholders for the quarter grew by 3.5% to S$68.9 million, driven by higher revenue and stronger contribution from associates and joint ventures.
The company also provided the following outlook guidance:
“Despite the slowdown in the global economy, increasing volumes in the aviation industry and strong demand for convenient food in Asian cities are creating growth opportunities for SATS. We are well-positioned to extend our market leadership in Asia Pacific, especially in the large, dynamic markets.
China is a key market for us for scale and connectivity, and we have invested in ground and cargo handling, and catering operations at the new Daxing International Airport in Beijing. Furthermore, we are building new central kitchens in China to supply fast casual restaurant chains in key cities. At the same time, our new ground and cargo handling ventures in India and Malaysia are already growing profitably.
We continue to enhance the sustainability of our business by digitalising our operations, developing our people, and building new capabilities while seeking acquisitions that can help us accelerate the implementation of our strategy to feed and connect Asia.”
Looking at what institutional investors are doing could 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 SATS Ltd and Singapore Exchange Limited.
Motley Fool Singapore 2019