Director Deeds: Buyer behaviour spreads to small caps

Another fortnight has gone and it’s been another fortnight dominated by ASX Directors topping up their stake amidst the continued market uncertainty.

This trend which really kicked off at the beginning of March doesn’t seem to be an anomaly in these corona times, but rather, a sustained effort from company Directors who could be buying shares in their companies for a multitude of reasons.

While we can only speculate the exact motive behind this, buying season has continued into April with 135 ‘buys’ and just nine ‘sells’ between March 31 and April 9.

With the number of buys a bit below the levels seen in the last month, it’s been interesting to note that within the past two weeks there’s been a shift in the type of companies that have seen insider purchases.

While the previous two editions of Director Deeds have focused on the ASX200’s larger companies, the last fortnight has seen Directors of small and mid-caps hitting the buy button, particularly in the resources industry.

We’ll start with one of the few ASX200 companies to feature this week in toll road operating giant Transurban (ASX: TCL), which has experienced a busy few weeks, having announced the impact COVID-19 travel bans and quarantining is having on business. At the beginning of April, the company announced it has withdrawn its second-half dividend guidance as it looks to cut costs in response to traffic numbers plunging. The day after that announcement, Transurban’s CEO, Scott Charlton, sold 200,000 indirect shares at $11.70 – a transaction worth $2.34 million. On April 3, the company announced to the ASX that Charlton’s sale was to “fund impending tax and financial obligations.” On the same day of Charlton’s trades, two Transurban Non-executive Directors increased their stakes in the company, with Terry Bowen buying 15,000 shares at $11.84 and Mark Birrell purchasing 4,000 at $11.67. As TCL’s share price recovers from a 52-week low of $9.10 in mid-March, it now sits at $12.55 (at time of writing).

Last edition we discussed how the resources sector and in particular, the oil and gas industry were faring with the economic turbulence, which was being exacerbated by an oil price war.

With the oil price plummeting, The Organisation of the Petroleum Exporting Countries (OPEC) and its allies made an agreement this week to cut oil supplies by nearly 10 per cent, in a bid to put a halt to the declining oil price.

Prior to this, buying within the sector had continued on from previous weeks. Small-cap petroleum exploration and production company Metgasco (ASX: MEL) had its Chairman, Philip Amery buy 156,088 shares at 2.4 cents in late March. Senex Energy (ASX: SXY) Non-executive Director, Ralph Craven, also hit the buy button, increasing his stake in the company by 100,000 shares at a trade price of 16.5 cents.

There was similar activity elsewhere in the resources sector with Director buying occurring across a variety of companies focusing on different commodities.

Australian nickel producer Western Areas (ASX: WSA) had Non-executive Director Tim Netscher top up his holdings, purchasing 17,000 shares at $1.90 on March 31. Since then, the company’s share price has continued to rebound from its 52-week low of $1.62 a week prior and now sits at $2.15. Fellow nickel company albeit smaller in size, Duketon Mining (ASX: DKM), which invests in exploration projects, had its Non-executive Chairman, Seamus Cornelius hitting buy on 100,000 shares at a price of 11.8 cents.

Directors of ASX gold miners have continued to be an active presence as the precious metal’s price in the Australian currency remains elevated and in record-breaking territory as investors have jumped on the safehaven asset in response to market uncertainty.

Directors at Western Australian gold producer Red 5 (ASX: RED) saw the beginning of April as the time to increase their holding as gold prices climbed. Non-executive Director, Ian Macpherson, was first to hit the buy button on April 6, purchasing 150,000 shares at 19.1 cents in the company which operates in the Eastern Goldfields of WA. This was followed two days later by Chairman Kevin Dundo, who increased his stake by 170,000 shares, purchasing them at a trade price of 18.8 cents.

Fellow junior gold miner Austar Gold (ASX: AUL) also received further backing with its Chairman Philip Amery making two share purchases over the last fortnight. The first was on April 3 where he bought 50,000 shares at 28 cents which was followed six days later by purchasing a further 5,000 shares at 29.7 cents, a combined investment of just over $11,500.

There’s also been a notable number of Directors of companies with foreign gold projects that are buying in at the moment. Theta Gold Mines (ASX: TGM), which operates a large goldfield in South Africa’s Eastern Goldfields, had its Managing Director invest a bit over $20,000 in the business, buying 99,647 shares at 21.5 cents. It’s a similar story for fellow small-cap gold miner Black Dragon Gold Corp (ASX: BDG), which wholly owns the Salave gold project in the Asturias region of Spain. The company’s Executive Director, Paul Cronin, topped up his stake by purchasing 208,946 shares at 6 cents earlier this month.

Iron ore miner Brockman Mining (ASX: BCK) which has projects in the Pilbara region of Western Australia had one of the bigger insider purchases within the past fortnight. Its Chairman, Kwai Hon, purchased 3.84 million shares at a price of 15.5 cents on March 31, equating to a $595,286 investment in the company, perhaps suggesting a more bullish outlook on iron ore despite its price dropping in March due to lower steel output in China.

As we discussed last edition, there is a close relationship between the mining industry and the mining services sector, meaning disruption in the former often flows through to the latter.

There were some big buys in heavy equipment service and maintenance company Mader Group (ASX: MAD), which has suffered at the hands of COVID-19, with its share price dropping 36 per cent in the past two months. On April 2, Executive Director Luke Mader made two significant purchases in the company with a combined value of $710,000. The first transaction saw him buy 73,529 shares at 68 cents followed by 1.07 million shares at 61.5 cents. On the same day, Non-executive Director Craig Burton invested $610,000 in shares, purchasing 1 million at a trade price of 61 cents.

A more familiar name in the resources services sector is Worley Parsons (ASX: WOR), which is another company that seems to be rebounding from a 52-week low reached in March. The global engineering company’s share price was as low as $4.63 in March but now sits at $8.04. Worley Non-executive Director Thomas Gorman seems to have backed in the company on its rise up, purchasing 6,316 shares on April 1 at a price of $7.04, equating to a $44,465 investment.

You can access a full list of all Director transactions on the ASX here.

Note: The share price of companies mentioned was quoted at the time of writing and may have changed since.