2iQ Insider Brief : Rheinmetall AG (RHM GR) Guala Closures SPA (GCL IM) Salini Impregilo (SAL IM)

Kaloyan Kolev 17 January 2019

Rheinmetall AG (RHM: GR) 

12-month performance: -26%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CFO and both Chairmen
Recent news: Defence sector hit by Saudi Arabia uncertainty

 Rheinmetall is a German company that specialises in security and mobility solutions. The group’s Defence sector is Europe’s foremost supplier of army technology, while its Automotive sector is a first-tier supplier of modules and systems to the automotive industry. The stock is listed on the XETRA and currently has a market capitalisation of €3.6bn.

 

Rheinmetall shares had an excellent run between early 2015 and mid-2018, rising from around €36 to €115. Yet the stock pulled back in the second half of 2018 as trade wars escalated, equity markets declined, and the German government halted approval of new arms deals to Saudi Arabia – the world’s third-largest defence spender – after the killing of journalist Jamal Khashoggi in the Saudi consulate in Istanbul in October. Over a six-month time frame, the stock is down nearly 20%.

 RheiMETALL

Source: 2iQ Research

From an insider transaction perspective, we think the shares could have upside potential from current levels. We say this because in the last month, eight top-tier directors have purchased shares in the company, which is a bullish signal. Those buying have included key insiders such as Chairman of the Supervisory Board Ulrich Grillo, Chairman of the Executive Board Armin Papperger, and CFO Helmut Merch, who have all made significant purchases. With the group continuing to win new contracts and top-level directors boosting their holdings, we believe the outlook for the stock is favourable.

 

Guala Closures Spa (GCL: IM) 

12-month performance: -40%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO, CFO and COO
Recent news: Reduced FY2018 guidance

 Guala Closures is an Italian company that is engaged in the production of non-refillable closures for the alcoholic beverage industry. Selling over 14 billion closures per year, the group’s solutions help make the counterfeiting of packaging difficult, which enables spirits manufacturers to protect their brand image. The stock is listed on the Borsa Italiana and currently has a market capitalisation of €356 million.

 

Shares in Guala Closures experienced a difficult second half of 2018, falling from around €10 at the start of July to under €6 at the end of the year. The stock was sold off in September when the group announced a first-half net loss of €1.2 million, versus a profit of €0.9 million the year before, and then experienced further weakness in November, when the group announced a reduction to its FY2018 sales and adjusted EBITDA guidance. Down around 40% over the last six months, the stock is out of favour right now.

 Guala Closures

Source: 2iQ Research

However, from an insider transaction perspective, we think the stock looks interesting at present. This is due to the fact that since the stock has fallen recently, we have observed substantial buying activity from key insiders. Those buying have included top-level directors such as CEO Marco Giovannini, CFO Anibal Diaz Diaz, and COO Francesco Bove, all of whom have bought multiple tranches of shares while the share price has been under €6. This buying activity suggests that management is confident about the medium-to long-term prospects of the company. As such, we believe the stock could be worth a closer look at current levels. 

 

Salini Impregilo Spa (SAL: IM) 

12-month performance: -51%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO and CFO
Recent news: Sold plants & paving division

 Salini Impregilo is an international industrial group that specialises in the construction of major, complex infrastructure projects. Operating in over 50 countries across the world, the company’s projects include the construction of road networks, highways, bridges, airports, railway lines, underground works, residential and office buildings, and hospitals. The stock is listed on the Borsa Italiana and currently has a market capitalisation of €809 million.

 

Salini Impregilo shares have had a poor 12 months, falling from around €3.30 to €1.60. A write down of the company’s Venezuelan assets, a cut to revenue guidance, political instability in Italy, and investor concerns over slowing global growth have been the main drivers of the share price decline. Down around 50% over the last year, investors are clearly concerned about the company’s growth prospects.

 Salini Impregilo

Source: 2iQ Research

However, analysing recent insider transaction activity, we think the stock has turnaround potential. This is by virtue of the fact that CEO Pietro Salini has been acquiring a substantial amount of stock (over 9 million shares) in the last month, which we see as a positive development as the CEO is likely to have an excellent understanding of group’s future prospects. CFO Massimo Ferrari and General Manager Claudio Lautizi have also purchased shares recently, which is another bullish sign. With three key directors purchasing shares in Salini Impregilo over the last month, we believe the stock is worth watching closely going forward.

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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