Top-level corporate executives tend to have an information advantage over other investors because they know their companies better than anyone else. If these insiders are buying company stock, it can be a sign that the outlook for the stock is favorable.
In this report, we are going to highlight some interesting insider buying at Perfect Shape Medical Limited (1830:HK). Perfect Shape Medical is a provider of premium slimming and beauty services that operates in Hong Kong, China, and Australia. It is listed on the Hong Kong Stock Exchange and currently has a market capitalization of HKD 8.7 billion.
Perfect Shape Medical: Insider Buying
Our records show that since mid-April, Perfect Shape’s Chairman and CEO Dr. Au-Yeung Kong has purchased stock four times. In total, the insider has acquired 2,944,000 shares, spending around HKD $19.4 million (USD $2.5 million) on the stock.
This insider trading activity stands out for a couple of reasons. Firstly, Dr. Au-Yeung Kong is a top-tier insider with a significant company and industry experience. Dr. Kong founded Perfect Shape in 2003 and was appointed as Chairman and CEO of the Company in March 2011. He is responsible for the overall management, strategic development, and major decision-making. Given his experience, he is likely to have a good understanding of the company’s prospects.
Secondly, Dr. Kong has made a number of well-timed purchases recently. In mid-February, for example, he bought 2.3 million shares at a price of HKD 4.62 per share. Since then, the stock has risen to HKD $7.10. Our model gives the insider a high short-term Trading IQ of 112.
Perfect Smile delivered a strong financial performance in 2020 given the economic environment. For the year, revenue was up 4% to HKD $1.24 billion, while profit was up 12% to HKD $450.6 million. Earnings per share came in at HKD $32.2 versus HKD $28.9 in 2019.
Looking ahead, Perfect Smile is planning to expand internationally over the next five years in order to boost its growth. Its goal is to penetrate close to a dozen nations, including Australia, Canada, the UK, and the US, as well as countries in Asia such as Singapore, Taiwan, Thailand, Indonesia, Malaysia, the Philippines, and Vietnam. The group believes there are “enormous opportunities” in the US due to increasing concerns over personal appearance and it intends to replicate its successful Hong Kong business model in similar metropolitan centers in the US, with its first target being New York.
The recent purchases from Chairman and CEO Dr. Au-Yeung suggest that he is confident about the future. We view this insider buying activity as bullish.