Hong Lai Huat Group Gains 23%, Insider Trades Reap Benefit

Hong Lai Huat Group Limited (SGX:CTO) insiders who purchased shares in the last 12 months were richly rewarded last week. The stock climbed by 23% resulting in a S$5.7m addition to the company’s market value. In other words, the original S$168.0k purchase is now worth S$231.9k.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

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Hong Lai Huat Group Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Executive Deputy Chairman & Group CEO Bee Huat Ong for S$168k worth of shares, at about S$0.042 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of S$0.058. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

Check out our latest analysis for Hong Lai Huat Group

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Hong Lai Huat Group insiders own 60% of the company, currently worth about S$18m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Hong Lai Huat Group Insider Transactions Indicate?

The fact that there have been no Hong Lai Huat Group insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, Hong Lai Huat Group insiders feel good about the company's future. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To help with this, we've discovered 4 warning signs (2 make us uncomfortable!) that you ought to be aware of before buying any shares in Hong Lai Huat Group.

But note: Hong Lai Huat Group may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.