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Are Insiders Too Confident In Suntec Real Estate Investment Trust (SGX:T82U)?

Dale Lombardi

Listed on 9 December 2004, Suntec REIT holds properties in Suntec City, Singapore’s largest integrated commercial development (including one of Singapore’s largest shopping mall), a 60.8% interest in Suntec Singapore Convention & Exhibition Centre, a one-third interest in One Raffles Quay, a one-third interest in Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall, and a 30.0% interest in 9 Penang Road. Suntec Real Estate Investment Trust is one of Singapore’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 38.82 million shares during this period. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. However, these signals may not be enough to gain conviction on whether to invest. I will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.

View our latest analysis for Suntec Real Estate Investment Trust

Which Insiders Are Buying?

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More shares have been bought than sold by Suntec Real Estate Investment Trust insiders in the past three months. In total, individual insiders own over 482.26 million shares in the business, which makes up around 18.08% of total shares outstanding.

Insiders that have recently bought more shares are: Hwee Chiang Lim (board member) and Yigang Tang This statement is created if only one individual insider bought company shares in past 3 months . The entity that bought on the open market in the last three months was ARA Asset Management Limited BlackRock Inc.. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.

Does Buying Activity Reflect Future Growth?

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Analysts’ expectations for earnings over the next 3 years of -20.1% provides poor outlook for the company, however, this is contrary to the signal company insiders are sending with their net buying activity.

Digging deeper into the line items, Suntec Real Estate Investment Trust is believed to experience negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. This is expected to impact its bottom line next year given the large negative growth rate expected, indicating cost-cutting may not be able to pull it through into a positive growth region yet.

However, company insiders appear to know something the market doesn’t and have been investing more money into the stock. This may mean they believe in a turnaround or believe the stock is well-undervalued by negative market sentiment.

Did Insiders Buy On Share Price Volatility?

Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook.

Suntec Real Estate Investment Trust’s shares ranged between SGD1.92 and SGD1.67 over the past three months. This indicates a trivial share price movement, with a change of 14.97%.

Insiders’ purchases may not be driven by this movement but perhaps their view of the company’s growth in the future or simply their individual portfolio rebalancing.

Next Steps:

Suntec Real Estate Investment Trust’s insider meaningful buying activity tells us the shares are currently in favour, though negative growth in expected earnings contests this assumption, and the share price has not moved significantly to warrant reassessment of mispricing. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two relevant factors you should further research:

  1. Financial Health: Does Suntec Real Estate Investment Trust have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Suntec Real Estate Investment Trust? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.