Insider Buying

2iQ Insider Brief: JCDecaux(DEC FP) Babcock International(BAB LN) Ratos AB(RATOB SS)

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JCDecaux (DEC: FP)

 12-month performance: -5%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including Co-CEO and Chairman
Recent news: Solid Q1 results

 

JCDecaux is a French advertising company that specialises in outdoor advertising. The largest outdoor advertising company in the world with a presence in over 75 countries, the company helps its customers advertise on street furniture, billboards, and on transport. The stock is listed on the Euronext - Paris and currently has a market capitalisation of €5.7 billion.

JCDecaux reported a solid set of Q1 results in May. For the quarter, adjusted revenue climbed 13.1% to €840 million, while adjusted organic revenue rose 5.4%. The group’s transport division – which generates over 40% of total revenue – performed particularly well, with revenue from this division surging 25.4% on the back of strong growth in China and North America. Additionally, the group also announced a number of new contract wins. However, despite the solid Q1 performance, the shares fell 14% in May.

DEC_FPSource: 2iQ Research

What looks interesting to us about JCDecaux is that since late May, a number of insiders – who are all members of the Decaux family – have been purchasing shares in the company. Those buying have included Jean-Francois Decaux and Jean-Charles Decaux, who are Co-CEOs of the group and alternate as Chairman, as well as Jean-Sebastian Decaux, who is CEO of Southern Europe, Africa, Belgium, Luxemburg and Israel. These insiders are likely to have an excellent understanding of the company and its future prospects, so we see their buying activity as a bullish signal. It’s also worth noting that Jean-Francois and Jean-Charles have good track records when it comes to timing their purchases. Given this buying activity, we think the outlook for JCDecaux shares is favourable.

 

Babcock International (BAB: LN)

 12-month performance: -45%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO and Chairwoman
Recent news: Subject to a short attack

 

Babcock International is a UK engineering services company that provides bespoke services to the defence, emergency services, and civil nuclear sectors. Specialising in managing complex assets and infrastructure, the group serves customers both in the UK and internationally. The stock is listed on the London Stock Exchange and currently has a market capitalisation of £2.4 billion.

 

Babcock shares have fallen by 45% over the last year. One reason for this is that the company has been subject to a shorting attack by a mysterious group named Boatman Capital Research which has stated that Babcock has systematically misled investors by burying bad news. However, Babcock has strongly denied the allegations made by the short seller and stated earlier this month that it is targeting earnings growth of 3% to 4% per year in the medium term even though revenue and profit before tax are expected to fall this year.

BAB_LN

Source: 2iQ Research

Analysing insider transaction activity at Babcock, we think the shares could be worth a closer look right now. This is due to the fact that since the start of June we have observed purchases from CEO Archie Bethel, Chairwoman Ruth Cairnie, and independent non-executive director Myles Lee. This buying activity suggests that these directors are confident about the future and expect the shares to rise. With the shares currently trading on a P/E ratio of just 6.6 and offering a dividend yield of 6.3%, and multiple insiders buying, we think Babcock has turnaround potential.  

 

Ratos AB (RATOB: SS) 

12-month performance: -16%
Insider activity: Bullish
Buying pattern: Multiple purchases from Chairman
Recent news: Good Q1 results

 

Ratos is a Swedish private equity company that owns and develops unlisted medium-sized Nordic companies. Its objective is to contribute to the long-term and sustainable business development of the companies it invests in, and make value-generating transactions. The stock is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalisation of SEK 8.5 billion.

 

We last covered Ratos in mid-February. At the time, we noticed that a number of top-tier directors including the CEO and Chairman were buying shares in the company while the share price was below SEK 20 and we stated that, in our view, the stock was worth a closer look. Fast forward to today, and the stock now trades at SEK 26 after surging on the back of strong Q1 results last month, representing a gain of around 30% since our mid-February report.

RATOB_SS

Source: 2iQ Research

Analysing recent insider transaction activity, we think the uptrend here could have further to run. We say this because since late May, Chairman Per-Olof Soederberg has made three more purchases of Ratos shares, adding another 500,000 shares to his holding. These purchases, which have cost the insider the equivalent of around USD $1.4 million, have boosted his holding from 300,000 shares to 800,000 shares, which suggests that the Chairman is confident about the future. With the company reporting a healthy set of results for Q1, and the Chairman boosting his stake in the company significantly, we think the shares have the potential to keep rising.