2iQ Insider Brief: Nordic Semiconductor (NOD: NO) Micro Focus International (MCRO: LN) ITE Group (ITE: LN)

Kaloyan Kolev 17 July 2019

Nordic Semiconductor (NOD: NO) 

12-month performance: -14%
Insider activity: Bullish
Buying pattern: Purchases from Chairman at higher prices
Recent news: Solid Q2 results

 

Nordic Semiconductor is a Norwegian company that is engaged in the development and sale of integrated circuits and related solutions for short-range wireless communication. Its solutions are used in a range of end products, including computer and tablet accessories, mobile and wearable devices, home electronic devices, sports and health monitors, and installed sensor networks. The stock is listed on the Oslo Stock Exchange and currently has a market capitalisation of NOK 7.3 billion.

We last covered Nordic Semiconductor in late December. At the time, the shares had just experienced a substantial sell-off on the back of trade war uncertainty and a profit warning, however, we noticed that multiple directors were buying shares in the company and said that in our view, a “share price rebound may not be too far off.” That has turned out to be a good call, as since our last report, the shares have risen from NOK 29 to NOK 41 – a gain of 41%.

NOD_NO

Looking ahead, we think there could be further gains on the horizon. We say this because last week Chairman Birger Steen – who was buying shares in late December – purchased another 25,000 shares at a share price of NOK 39.20. This boosted his personal holding in Nordic Semiconductor by nearly 20%. With recent Q2 results showing that the company has regained its momentum after some performance issues late last year, and the Chairman continuing to buy shares, we believe Nordic Semiconductor has the potential to keep rising.

 

Micro Focus International (MCRO: LN) 

12-month performance: +31%
Insider activity: Bearish
Buying pattern: Large sales from Chairman
Recent news: Disappointing half-year results

 

Micro Focus is a UK-based IT company which specialises in helping its clients merge new technology solutions with existing IT infrastructure. After acquiring the software business of Hewlett Packard Enterprises’ (HPE) in 2018, the group is now one of the world’s largest pure play infrastructure software companies. The stock is listed on the London Stock Exchange and currently has a market capitalisation of £5.8 billion.

 

After a strong run between January and early July, Micro Focus shares have fallen sharply in the last week. The sell-off appears to have been caused by two factors. First, interim results released on 9 July were a little disappointing, with revenue for the period declining 5%. Second, Chairman Kevin Loosemore sold £4 million worth of stock on 10 July, and £7.5 million worth of stock on 11 July – around half his stake in total – which could be interpreted as a bearish signal. Should investors be concerned about this selling activity?

MCRO_LN

Looking into Loosemore’s transactions, we believe that investors should not be too concerned about these trades. While the transactions do look bearish at face value, it turns out that the Chairman has sold the shares to diversify his portfolio as he is nearing retirement age. “Until now, all of my assets have been held in Micro Focus shares. Having recently turned 60, it is time for me to diversify a little, although around half my personal wealth remains in the stock”, Loosemore stated. In our view, this is a perfectly valid reason to sell stock. While Micro Focus still clearly has work to do to integrate its recent purchase of HPE, we don’t think investors should focus too heavily on the Chairman’s recent trades. 

 

ITE Group (ITE: LN)

 12-month performance: -20%
Insider activity: Bullish
Buying pattern: Purchases from Chairman and CFO
Recent news: Solid trading update 

 

ITE Group is a leading UK-based organiser of trade exhibitions and conferences. The group operates in 18 countries and is well known for its events in emerging markets. The stock is listed on the London Stock Exchange and currently has a market capitalisation of £556 million.

 

After a poor performance last year, ITE Group shares have rebounded from 64p to 72p this year, on the back of a string of good updates. Just recently, the group announced that revenues for the nine months to 30 June were up 31% on the year before, and that as of 28 June 2019, the company had booked £210 million of revenue for FY2019, representing 98% of current market expectations for the full year. It also advised that it was confident of achieving its full-year expectations.

ITE_LN

Looking at insider transaction activity here, we think the recent uptrend could have further to run. We say this because since the group’s most recent trading update, we have observed a number of buy transactions from both Chairman Richard Last and CFO Andrew Beach, which, in our view, is a bullish signal. Last has recently purchased 200,000 shares to boost his personal holding by 67%, while Beach has added 25,000 shares to boost his personal holding by 25%. Non-executive director Nicholas Backhouse also purchased 50,000 shares in June. With the company showing that it has recovered from operating problems it experienced in 2017 and 2018, and multiple insiders buying, we think the shares could continue moving higher.

Disclaimer: Neither 2iQ Research GmbH nor its content providers are responsible for any damages or losses arising from any use of this information.

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