Director Deeds: Big bankers hit buy

With many COVID-enforced changes occurring across the market and society, I heard Larry Diamond, the CEO of buy now pay later company Zip Co, ask an important question that should be playing on investors' minds. 

“The call-out is what the new normal looks like, and how long before the new normal is the actual normal?”

For this Director Deeds column, I’ve begun to ask myself that exact question as we enter yet another fortnight where Director buys have dominated those selling stock.

Since the outbreak of COVID-19 started to impact markets around March, this has been the case and as we discussed a fortnight ago, while the number of transactions have settled from its peak in mid-March, the pattern of buying is still very much present.

Over the last fortnight I counted 154 Director buys and just 13 sells, and this week the big area of focus is the banking sector.

It’s been an eventful month for Australia’s Big Four banks, revealing just how hard COVID-19 has hit business through the opening part of this year. 

With all of the major banks trading near five-year lows or more, investors have begun to question the reliability of bank stocks, given dividend cuts, capital raisings and low share prices are clouding the sector.

Perhaps this shareholder concern has been the catalyst for an uptick in Director purchases, particularly in the case of Westpac, which continues to make headlines as it deals with accusations of breaching anti-money laundering rules levelled by AUSTRAC.

This has coincided with the release of its half-year results earlier this month which revealed cash earnings were down 70 per cent and its interim dividend is to be deferred.

The day after Westpac (ASX: WBC) released its half-year results, three of its board members went straight to the market and topped up their stake. Westpac’s new Chairman John McFarlane led the way, staggering the purchase of his first lot of ordinary shares on May 5 across three transactions which totalled a $158,335 investment. The transactions added up to a total purchase of 9,900 shares at an average price of $15.99. Two days later, McFarlane added a further 100 shares to his holding which he bought at the trade price of $15.78, taking his total holding to 10,000 shares. On May 5, McFarlane was joined by Non-executive Director Craig Dunn, who bought 4,900 shares at $16.12 – a $79,027 investment, while fellow Non-executive Director Peter Nash bought 6,000 shares at $15.96, which was a $95,760 investment. With Westpac’s share price over the last few months hovering around lows not seen since 2012, the timing of these Director Deeds seems to send a message of reassurance to shareholders as the company faces a tough period ahead.

In the last edition of Director Deeds, we looked at National Australia Bank’s (ASX: NAB) results and an initial purchase of shares by Non-executive Director Ann Sherry. As we turn our attention to the last fortnight, the most interesting transaction of May would have to be the $731,000 outlay by NAB’s CEO Ross Mcewan. NAB’s top dog bought 47,500 shares on market at $15.40 – a far cry from the $27 share price the big bank was offering just three months ago. The transaction significantly boosts Mcewan’s skin in the game, given he previously held just 5,000 shares which he bought late last year upon beginning the role of NAB’s new CEO.

Major energy company AGL Energy (ASX: AGL) has also seen a relatively busy fortnight in Director movements as its share price recovers from the COVID-19 induced lows of mid-March. The company which provides electricity, gas, solar and renewable energy for residential and commercial use, was trading as high as $21.12 in February this year, however, in the face of COVID-19 headwinds, it has traded as low as $15.15 in March. On May 5, Non-executive Director Diane Smith-Gander topped up her stake, purchasing 1,792 shares at $16.78, increasing her total holding to 9,462 shares. Three days later on May 8, she was joined by fellow Non-executive Director Patricia Mckenzie, who more than doubled her stake in the company, purchasing 4,565 shares at $16.43, bringing her total holding to 8,465 shares.

As the deluge of share purchase plans get underway, company announcements disclosing the participation of Directors are starting to trickle through to the ASX.

The board of Auckland International Airport (ASX: AIA) was heavily involved with its oversubscribed NZ$200 million share purchase plan (SPP). Each shareholder of the company was offered to subscribe for a maximum NZ$50,000 ($47,000) worth of shares and the company’s board participated to varying degrees. Chairman Patrick Strange helped himself to 3,358 shares at the $4.66 trade price, while Directors Julia Hoare (1,176 shares), Christine Spring (3,032 shares), Elizabeth Savage (96 shares), Mark Binns (4382 shares) and Justine Smyth (10,729 shares) all topped up their stakes too.

One of the few success stories of COVID-19 has been data centre operator Next DC (ASX: NXT), which has seen its share price rise 44 per cent so far this year. In early April, the company announced it was undertaking a capital raising to provide funding for a new data centre facility in Sydney and other growth initiatives. The raising included a $191 million share purchase plan which was completed on May 5 and there was strong representation across Next DC’s board. The company’s CEO Craig Scroogie and Non-executive Chairman Douglas Flynn were able to purchase double the $30,000 maximum amount, with Scroogie buying 3,846 direct shares and 3,846 indirect shares and Flynn purchasing 7,692 indirect shares at the $7.80 trade price. Non-executive Directors Jennifer Lambert, Stuart Davis and Gregory Clarke all applied for the maximum 3,846 shares.

Struggling travel booking company Flight Centre (ASX: FLT) completed the retail component of its non-renounceable entitlement offer earlier this month, raising $138 million at $7.20 per share. Stephen Mayne provided a run-down of Flight Centre’s capital raising in last week’s column from a retail shareholder perspective, given the company capped their ability to apply for additional shares at 25 per cent of their entitlement. Flight Centre’s board participated in varying degrees, with Non-executive Chairman Gary Smith (8,621 shares) and Non-executive Director Robert Barker (2,357 shares) purchasing the maximum number of shares under the 1-for-1.74 formula. However, fellow Non-executive Director John Eales, only took up 2,875 of the 5,172 shares he was entitled to, contributing 2,297 shares ($16,538) to the retail shortfall. Similarly, Non-executive Director Collette Garnsey only took up 1,725 of the 2,697 shares she was entitled to.

In the resources sector, iron ore and pellet production business Grange Resources (ASX: GRR) has been the beneficiary of a rise in the iron ore price, as its share price has recovered to levels seen at the beginning of this year. The company’s CEO Honglin Zhao bought a big lot of just over 1.2 million shares at a trade price of 23 cents, equating to a $280,412 investment. Australian-based uranium miner Boss Resources (ASX: BOE) saw a big buy from its Non-executive Chairman, Peter O’Connor, who purchased 2.8 million shares at 6.9 cents, valued at $194.207.

There’s also been activity among Directors of mining services companies, most notably Alberto Calderdon, the CEO of explosives and blasting major Orica (ASX: ORI), who increased his stake by 5,160 shares at a trade price of $15.57. Non-executive Director of Worley Parsons (ASX: WOR), Anne Templeman-Jones purchased 2,850 shares at $8.50 while Nathan Mitchell, the Executive Chairman of drilling services company Mitchell Services (ASX: MSV), bought 225,000 shares at 45.7 cents – a $102,875.

Despite there being only a handful of sells over the past fortnight, like the previous editions of Director Deeds, there are a few worth pointing out given the significant transaction value they hold.

None have been more eye-catching than the insider activity occurring at Paradigm Biopharmaceuticals (ASX: PAR), a company which is focused on repurposing a drug to treat osteoarthritis. Over the last two years, its share price has shot up from 28 cents in January 2018 to $4.24 in February this year, before crashing to around $1.30 in March. The company released a statement to the ASX on May 12 revealing that a group of Directors are selling a portion of shares to offshore institutional investors to boost ownership. This included Non-executive Chairman Graeme Kaufman selling 184,216 shares at $2.30, Non-executive Director John Gaffney offloading 115,695 shares at $2.37 and Managing Director Paul Rennie selling 92,108 shares at $2.30. Rennie, who is also the Founder of the company, sold an additional 4.03 million shares valued at $9.2 million to fund a residential property, loan, tax liabilities and to balance his investment portfolio. Rennie’s sale represents nearly 17.5 per cent of his holding, however, he still remains the company’s largest shareholder with 8.68 per cent ownership.

There was also a big sell made by the CEO of baby formula and food company, Bubs Australia (ASX: BUB). Kristy Carr, who is also the Founder of the company, sold a touch over 3.1 million shares on May 6 at a trade price of 95.8 cents, bringing her $3.01 million which is being used to meet personal tax obligations. Carr remains the second largest shareholder of Bubs Australia behind C2 Capital Partners as she still owns 2.43 per cent of the issued share capital. Bubs said that Carr “has no immediate plans to sell more shares.”