12-month performance: -48% Insider activity: Bullish Buying pattern: Purchases from multiple directors including CEO, Finance Director and Chairman Recent news: Q3 profit warning
Founded in 1970, RPS Group is an international consultancy group which advises clients on the built and natural environment across a broad range of public and private economic sectors, including property, energy and transport. Located in 125 countries across six continents, the company currently employs over 5,600 consultants and service providers. The stock is listed on the London Stock Exchange and currently has a market capitalisation of £321 million.
Shares in RPS Group fell sharply last week after the group released a Q3 trading statement that disappointed investors. Announcing that group fee income for Q3 was “marginally below” Board expectations, and that for the full year, fee income will be “marginally below” market expectations, investors were quick to dump the stock, with the share price falling from 207p to 142p, a decline of over 30%. However, with the company advising that it expects to pay out the same dividend as last year and that investment in the business should drive “increased shareholder returns in the medium term” have investors been too harsh here?
Source: 2iQ Research
Looking at recent insider transaction activity, it’s interesting to see that several key insiders have been purchasing large quantities of stock since the recent trading update and subsequent share price fall. On 25 October, we observed significant purchases from CEO John Douglas (207,348 shares), Finance Director Gary Young (61,800 shares) and Chairman Kenneth Lever (30,000 shares). These purchases suggest that management has confidence in the outlook for RPS and that top-level insiders see value in the current share price. As such, we think RPS Group is worth watching for a potential rebound in the medium term.
Volvo AB (VOLB: SS)
12-month performance: -20% Insider activity: Bullish Buying pattern: Purchases from CEO and main shareholder Recent news: Emission control issues
Volvo AB is the parent company of the Volvo Group – one of the world’s leading manufacturers of trucks, buses, construction equipment, diesel engines and marine and industrial engines. In addition to manufacturing vehicles and machines, the company also offers a range of services including insurance and financing solutions. With production facilities in 18 countries, the group operates in 190 markets worldwide. Listed on the Stockholm Stock Exchange, Volvo AB currently has a market capitalisation of SEK 284 billion.
Volvo shares have declined recently after the group warned on 16 October that some of its vehicle engines could be exceeding emissions limits due to failing emission control components. Advising that the overall costs of the emissions problem could be “material,” the group stated that it had launched a full investigation into the issue and added that all engines and vehicles had met emissions limits at the time of delivery but that some may be now exceeding limits in “certain markets with stringent emissions standards.” Shares in the group fell 8% on the news – its worst performance in over two years. So, what’s the best move for investors from here?
Source: 2iQ Research
Analysing recent insider transaction activity at Volvo, we think it’s worth noting that since the group announced the emissions control problem, CEO Martin Lundstedt has actually purchased more shares in the company, adding 15,000 shares at SEK 131.24 to boost his holding by 12%. This suggests the top-tier insider sees long-term value after the recent share price drop. And he’s not the only key insider to purchase more shares recently, as on 22 October, asset manager Industrivärden – Volvo’s main shareholder – acquired an additional 3.6 million shares in the company, for a total of around SEK 488 million. Given that Industrivärden currently owns approximately 30% of Volvo AB - A shares, it’s likely that the asset manager has good insight into the group’s future prospects. As such, we see the recent large purchase as bullish and think the stock could have the potential for a medium-term rebound, although we acknowledge there are risks to the investment case.
Tele Columbus AG (TC1: GR)
12-month performance: -65% Insider activity: Bullish Buying pattern: Purchases from CEO and CFO after new financing announced Recent news: Secured additional financing
Tele Columbus is a German cable television provider. The group is the third-largest cable provider in Germany with a nationwide network, and also offers customers other services such as broadband internet access and telephone lines. The company is listed on the Xetra and currently has a market capitalisation of €420 million.
Shares in Tele Columbus have endured a poor run in 2018, falling 64% on the back of multiple profit warnings and a number of broker downgrades. In May, the group advised that revenue growth for FY2018 was likely to be in the low to mid-single-digit range, down from an earlier forecast of mid-single-digits growth. Then in August, the company said that normalised EBITDA for the full year was likely to be at least €235 million, down from its estimate in May of between €265 million and €280 million. Brokers have been quick to slash their price targets for the company after the profit warnings, with Barclays cutting its price target from €7.20 to €3 in September. However, recently, the group announced that it had secured additional financing to enhance its flexibility and the shares have bounced off their September lows. Could there be further gains on the horizon?
Source: 2iQ Research
Looking at insider transaction activity here, the investment case certainly looks interesting in our view, as we have seen purchases from a number of key directors in the last two months. In September, Chairman Frank Donck purchased 185,000 shares, spending nearly €500,000, and then on 12 October, after the latest financing was announced, both CEO Timm Degenhardt and CFO Eike Walters bought 25,000 shares each at a share price of €3. Given that a number of top-level Tele Columbus directors are buying stock while the share price is depressed, we think the stock could have turnaround potential.
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