Carimin Petroleum – Who knows best? (public release)

Conventional wisdom holds that corporate insiders have private information about the future prospects of their firms that outsiders do not have. A large literature about the trading of corporate insiders has provided robust evidence that insiders exploit their informational advantage and earn abnormal returns on their trades. Read Jaffe, 1974; Finnerty, 1976; Seyhun, 1986; Rozeff and Zaman, 1998; Lakonishok and Lee, 2001; Jen, Metrick and Zeckhauser, 2003; Brochet, 2010.

Let’s examine whether this is the case for Carimin.

The chart above shows a particular corporate insider’s trading pattern. The insider started accumulating as much as 13.73m shares from April to July 2017, going from owning 0.8% of the company’s shares outstanding to 6.7%. Then approximately three months later on the 2^nd October 2017 Event 1 happened, the company announced that it had secured a contract from PETRONAS Carigali for the provision of maintenance, construction and modification (MCM) services.

The insider started buying small amounts in May and June 2018 picking up an additional 20,000 shares. On the 21^st  September 2018, a further 34,500 shares was transferred to the insider. Event 2 indicates the closing of 1Q19 at the end of September 2018. Two months later the company released its 1Q19 financial statements (Event 3) showing a 79% qoq and 240% yoy jump in revenues and its best ever quarterly earnings of RM12m.

Event 4 is the closing of 2Q19. In the following two weeks the insider disposed of 374,800 shares.

Carimin released its 2Q19 financial statements on the 21^st February 2019 (Event 5). Despite recording stronger revenue by 14% qoq and 239% yoy, earnings came in weaker qoq due to the monsoon period. Two weeks later, the insider disposed 2.10m shares.

Event 6 indicates the closing of 3Q19. In the next month of April 2019, the insider disposed 220,000 shares. 3Q19 financial statements were released on the 23^rd of May 2019 (Event 7). This time revenue was lower qoq by 2% but higher yoy by 381%, earnings continued to be weaker qoq again due to the monsoon period. However, this time the insider DID NOT DISPOSE any shares.

Event 8 marked the closing of 4Q19. As of writing the insider has NOT DISPOSED of any shares.

Who are you going to follow? A blogger on i3 who recommends switching to Uzma or a corporate insider who is holding on to their shares?