2iQ Insider Brief: TSCO:LN, FPAR:SS, SBS:GR

Robert Hable 15 October 2018

Tesco PLC (TSCO:LN)

12-month performance: +12%
Insider activity: Bullish
Buying pattern: Multiple directors buying including CEO, CFO & Chairman
Recent news: Solid half-year results

Tesco PLC is a grocery retailer that has over 6,800 stores across the United Kingdom, Ireland, the Czech Republic, Hungary, Poland, Slovakia, Malaysia and Thailand. Founded in 1919, the group is the largest supermarket chain in the UK, with a market share of approximately 27%. The stock is listed on the London Stock Exchange and currently has a market capitalization of £20.6bn.

After a strong run between July 2017 and early August 2018, in which Tesco’s share price climbed around 60%, the stock has corrected quite significantly in the last two months, falling over 20%. While half-year numbers released on 3 October looked solid, with sales up 12.8% (like-for-like up 2.3%) and adjusted earnings per share rising 18%, investors were clearly hoping for stronger numbers, as the stock plummeted 7% on the results. So, what’s next for Tesco stock? Is Tesco’s share price set to fall further or is the stock likely to rebound?

Tesco Performance

Source: 2iQ Research

Looking at recent insider transaction activity, the outlook for Tesco shares appears to be bullish. We say this because in the last week, we have seen buying activity from CEO Dave Lewis, CFO Alan Stewart, Chairman John Allan, and a number of other top-tier directors. When you consider that these top-level directors generally have the most insight into a company’s prospects, this buying activity suggests that management is confident about the future. As such, we think Tesco shares could be worth monitoring for a rebound.

Fast Partner AB (FPAR:SS)

12-month performance: +16%
Insider activity: Bullish
Buying pattern: Director buys from CEO and CFO
Recent news: Robust Q2 results

Fast Partner AB is a Swedish real estate company that develops, owns and manages its own properties. Founded in 1987, the group focuses primarily on managing commercial property in Stockholm. The stock is listed on the Stockholm Stock Exchange and currently has a market capitalization of SEK 10.2 bn.

Shares in Fast Partner have performed well this year. After accounting for the recent 3-for-1 share split, the stock has risen 18% year to date, outperforming the OMX Stockholm 30 index, which is only up 2% year to date, by a significant margin. Recent Q2 results released in July looked robust, with Q2 rental income rising to SEK 357.4 million, up from SEK 330.2 million a year ago, and Q2 profit from property management rising 13% on last year’s figure. Can the shares keep climbing higher on the back of these numbers?

Fast Partner Performance

Source: 2iQ Research

Analyzing recent insider transaction activity at Fast Partner, we believe the outlook looks bullish. In September, we saw four separate buys from CEO Sven-Olof Johansson (including a large buy worth USD $627,230), as well as two smaller buys from CFO Daniel Gerlach. This is a bullish indicator. We’ll also point out that CEO Johansson has been consistently buying stock since August 2017, registering 24 separate purchases in less than 15 months. Given this pattern of consistent director buying, we think the shares have potential for further gains.

STRATEC Biomedical System AG (SBS:GR)

12-month performance: -13%
Insider activity: Bullish
Buying pattern: Director buys from CEO, CFO & Chairman
Recent news: Profit warning

STRATEC Biomedical System AG is a German company that specializes in providing automation solutions for in-vitro diagnostics and life science companies. Leveraging expertise gained in nearly 40 years of automating laboratory processes, the group covers virtually the entire value chain for the specification, design, manufacture and approval of complex analyser system solutions. The stock is listed on the Frankfurt Stock Exchange and currently has a market capitalization of €574 million.

After trending sideways between January and early October, shares in STRATEC Biomedical crashed nearly 25% on 5 October after the group released a profit warning. In an ad hoc disclosure, the company announced that for 2018 it is now expecting sales to decline organically in the low-to mid-single-digit percentage range (previous forecast was organic revenue growth of 1% to 3%), and said that its adjusted EBIT margin is likely to be between 11% to 13% (previous forecast was around 16% to 17%). It blamed weak development in its Diatron segment, delay in a new product launch and reduced customer order forecasts for the downward revisions. However, the group did also advise that it sees its medium to long-term growth prospects as “positive” and that it is confident that it will be “generating clearly positive sales and earnings growth again from 2019.” So, after the significant share price drop, is now a good time to be investing in the company?

Stratec Biomedical PerformanceSource: 2iQ Research

Looking at recent insider transaction activity, it appears that management is willing to back up its positive medium to long-term forecasts by purchasing company stock, and that’s a good sign. On 5 October, the day of the profit warning, three key directors purchased shares in STRATEC, including CEO Marcus Wolfinger, CFO Robert Siegle and Chairman Fred Brueckner. Given that these three top-level directors possibly have the best understanding of STRATEC’s future prospects, we think this is a bullish signal. Consequently, we believe the stock could be worth watching for a medium-term rebound.

 

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