Insiders may sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
Here, we are going to highlight an insider purchase at Derwent London PLC (DLN:LN). Derwent London is a real estate investment trust that focuses on commercial property within Central London. The company manages its assets to maximize returns, adding value through developing and refurbishing properties in the portfolio, using designs that appeal to current and future trends. It’s traded on the London Stock Exchange and currently has a market capitalization of £3.81 billion.
Derwent London PLC: Insider Buying
Regulatory filings show that on 18 May, the Chairman of the Board at Derwent London, Mark Breuer, purchased 3,000 DLN shares at a price of £33.78 per share. This purchase cost the insider approximately £100,000 and increased his holding by 75%.
Experienced Investment Professional
Breuer worked in investment banking for thirty years and spent twenty years at JP Morgan. At JP Morgan, he held the position of Vice Chairman Global M&A. This means he is likely to be very adept at making investment decisions.
It’s worth noting that the insider has increased his holding in the company by a large percentage with this trade. This suggests that Breuer is confident the stock is set to move higher.
Derwent London’s share price was hit hard in 2020 as a result of Covid-19 and the impact it had on the commercial property market. The shares have slowly started to recover, however, and the latest Q1 update was reassuring.
During the quarter, there were £1.3 million of new property lettings secured and another £4.3 million was under offer at the end of the quarter. The majority of March 2021 quarter day rent was collected at 93% with another 4% expected to be collected in the current quarter. The vacancy rate remained low at 2.3%. Net debt fell to £905 million at 31 March 2021 from £1.049 billion at 31 December 2020. The loan-to-value ratio fell to 16% at the end of March, having been at 18.4% at the end of December. Interest cover rose to 4.7x at the end of the quarter, having been at 4.5x throughout 2020.
The outlook statement was very bullish. “We are seeing a marked increase in activity across our portfolio as London is emerging from lockdown and we now have £5.6m of lettings completed or under offer. Our occupiers are telling us that they are keen to return to their offices as the economy bounces back,” said CEO Paul Williams.
Given the strong outlook statement and the improving financial position, we see the recent insider buying activity as bullish. It suggests that the Chairman of the Board believes there is further mileage in the share price and that the recovery will continue as the UK starts to bounce back from Covid-19.