2iQ Insider Brief: Brenntag AG (BNR: GR) Imperial Brands PLC (IMB: LN) Cineworld Group (CINE: LN)

Desislav Delchev 21 January 2020

Brenntag AG (BNR: GR)

12-month performance: +17%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO and CFO
Recent news: Good Q3 results

Brenntag is a German chemical and ingredients distribution company. Operating in over 75 countries, the group manages complex supply chains for both chemical manufacturers and consumers by simplifying market access to thousands of products and services. The company is listed on the XETRA and currently has a market capitalisation of €7.6 billion.

Brenntag shares have had a good run since mid-August, rising from under €40 to €49. The stock has been boosted by optimism regarding a trade war resolution as well as better-than-expected third-quarter results. Analysts at Credit Suisse recently raised their price target for the stock to €54.50 from €49.

 

blog 21 jan                       Source: 2iQ Research


Looking at insider transaction activity, we think Brenntag shares have the potential to keep rising. We say this because in the last week, insiders have been buying shares aggressively. Those buying have included CEO Christian Kohlpainter, who made his first purchase on 16 January and has since made three additional purchases, CFO Georg Mueller, and three members of the Supervisory Board. Given that these insiders are likely to have a good understanding of the company’s future prospects, we see this buying pattern as very bullish.

Imperial Brands PLC (IMB: LN)

12-month performance: -19%
Insider activity: Bullish
Buying pattern: Large purchases from two directors
Recent news: Regulatory clarity in the US vapour market

Imperial Brands is a fast-moving consumer goods company with a tobacco heritage. The group owns a number of cigarette brands including Davidoff, West, and Winston, and also has exposure to next-generation products (NGP) such as vapour and heated tobacco products, and cannabis. The company is listed on the London Stock Exchange and currently has a market capitalisation of £19.3 billion.

We last covered Imperial Brands in late November when the stock was trading at 1,700p. At the time, we noted that Group Innovation & Science Director David Newns had just purchased a large number of shares, following purchases from the CEO, CFO, and Chairman in October. Since that report, IMB shares have performed well, climbing to 2,000p and outperforming the FTSE 100 index by about 15%. The stock has been boosted by regulatory clarity in relation to the US vapour market as well as a market shift towards shares that offer value.

 

blog 21 yan nr 2                      Source: 2iQ Research

Analysing insider transaction activity, we think Imperial Brands shares can keep rising. We say this because in the last month directors have continued to buy. On 20 December, Group Strategy Director Amal Pramanik purchased 10,000 shares, spending nearly £190,000 on stock, while more recently, Senior Independent Director Sue Clark purchased 5,000 shares on 15 January for a cost of around £100,000. These purchases suggest that these insiders still see the stock as undervalued. With that in mind, we believe IMB’s recent rebound has further to run.

Cineworld Group (CINE: LN)

12-month performance: -22%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including Vice Chair
Recent news: Disappointing trading update

Cineworld Group is a cinema operator that has operations in the UK, Europe, and the US. After its recent acquisition of US cinema company Regal Entertainment Group, it is now the second-largest cinema business in the world by number of screens. The company is listed on the London Stock Exchange and currently has a market capitalisation of £2.6 billion.

Cineworld shares have underperformed since May, falling from around 300p to 190p. There are a few reasons the stock has underperformed. Firstly, recent results have been disappointing. For example, a trading update in December showed a 10% decline in revenue for the period 1 January 2019 to 1 December. Secondly, debt has increased. Just recently, the group announced the acquisition of Canada’s Cineplex for $2.1 billion, which could push debt out to 3.7 times EBITDA, according to analysts at Morgan Stanley. Finally, shorters have targeted the stock, which has no doubt spooked some investors.

blog 21 yan nr 3                      Source: 2iQ Research


Examining insider transaction activity here, we can see that three insiders have purchased shares in Cineworld recently, including Vice Chair Alicja Kornasiewicz who added 43,000 shares in late December. Normally, we would consider this to be a bullish signal. However, on this occasion, we think caution is warranted, as the short interest here is very high at 13.6%. Clearly, hedge funds smell blood. Given this high level of short interest, we think the stock is best avoided right now.

Disclaimer: Neither 2iQ Research GmbH nor its content providers are responsible for any damages or losses arising from any use of this information.

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