2iQ Insider Brief: Swedish Orphan Biovitrum AB (SOBI:SS) Evonik Industries AG (EVK:GR) Westlake Chemical (WLKP:US)

Robert Hable 21 November 2018
Swedish Orphan Biovitrum AB (SOBI: SS)
 
12-month performance: +70%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO and CFO
Recent news: Higher development costs to hit profits
Swedish Orphan Biovitrum (Sobi) is a Swedish biopharmaceutical company that is focused on treating rare diseases. The company operates two main business areas, Haemophilia and Specialty Care, and delivers treatments to patients in over 60 countries across the world. The stock is listed on the Stockholm Stock Exchange and currently has a market capitalisation of SEK 52 billion.

Sobi shares enjoyed a strong run earlier in the year, climbing from around SEK 110 at the start of 2018, to SEK 300 in early September, a rise of approximately 170%. Strong Q2 results in mid-July, in which EBITDA was 21% higher than consensus forecasts and the company raised its outlook for 2018 revenue, saw investors pile into the biopharmaceutical stock, pushing its share price significantly higher. Yet sentiment can change quickly in the stock market, and Sobi shares have fallen over 35% in the last two-and-a-half months as investors have dumped the stock on the back of concerns over higher development costs. Could this share price weakness have provided a buying opportunity?
 
SOBI-SS
Source: 2iQ Research

Analysing recent insider transactions at Sobi, we believe the recent share price weakness may indeed be an opportunity. We say this because over the last week, four top-level directors have been acquiring Sobi shares at around the SEK 180 - SEK 190 mark, which suggests that they see long-term value at that level. The directors buying include key personnel such as CEO Guido Oelkers (49,000 shares @ SEK 189.86), and CFO Henrik Stenqvist (10,000 shares @ SEK 180.00) – who most likely have an excellent understanding of the company’s future prospects. We see this pattern of director buying at Sobi as a bullish signal.


Evonik Industries AG (EVK: GR)
 
12-month performance: -18%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including Deputy Chairman and CFO
Recent news: Broker downgrades
Evonik Industries is a speciality chemicals company headquartered in Germany. The group operates four key segments including nutrition and care, resource efficiency, performance materials, and services, and its chemical products can be found in a wide variety of end products such as car tires, mattresses, tablets, and animal feed. The stock is listed on the XETRA and currently has a market capitalisation of €12.1 billion.

Evonik shares have fallen over the last two months, after majority shareholder RAG-Stiftung announced in late September that it would sell 16 million shares – around 3.4% of the company’s registered share capital – for approximately 500 million euros, in order to diversify its portfolio. The stock has also been impacted negatively by general market weakness across Europe, and recent broker downgrades from Credit Suisse and Barclays. With the shares falling to levels not seen since late 2016 despite solid Q3 results in early November, could now be a good time to go long?
 
EVK-GR
Source: 2iQ Research

Looking at recent insider transaction activity, the outlook for Evonik shares looks positive, in our view. This is due to the fact that in the last fortnight, we have observed buying activity from three key directors, including Deputy Chairman of the Executive Board Harald Schwager, and CFO Ute Wolf, who both purchased 10,000 shares. Given that multiple directors are purchasing shares after the recent share price fall, we think the stock could be worth a closer look at current levels.
Westlake Chemical (WLKP:US)
 
12-month performance: -24%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO and Chairman
Recent news: Solid Q3 earnings
Westlake Chemical is an international manufacturer and marketer of basic chemicals, vinyls, polymers and building products, headquartered in Houston, USA. The group’s products are used in a broad range of industries such as packaging, automotive, construction and refrigerants. The stock is listed on the New York Stock Exchange and currently has a market capitalisation of $9.2 billion.

After hitting an all-time high of $124 in May, Westlake shares have performed poorly over the last six months, declining over 40%. Investors were not impressed with Q2 earnings, released in August, as the company’s quarterly earnings came in at $2.12, well below the consensus earnings figure of $2.52. Yet over the last few months, Westlake has announced a 19% increase in its quarterly dividend, and also announced that it will continue buying back shares. With Q3 earnings per share recently beating consensus estimates, could now be a good time to buy the stock?
 
WLKP-US
Source: 2iQ Research

Analysing recent insider transaction activity at Westlake, we are bullish on the outlook for the stock. This is because our records show that between 13 November and 16 November, President and CEO Albert Chao purchased four separate tranches of Westlake stock, for a total consideration of over $750,000, which we view as a positive development. And he’s not the only key insider that has been buying shares recently, as our records also show that Chairman James Chao purchased 10,000 shares on 12 November, as did Board of Directors General Partner David Lumpkins, who acquired 4,000 shares on the same day. Given that a number of top-level insiders have been buying shares in Westlake Chemical recently, we think the stock could have the potential for a rebound.

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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