Servcorp Limited CEO splurges $170,000 on shares: Should you join him?

Servcorp Limited (ASX: SRV) CEO Alf Moufarrige has just rocked into the market to pick up $169,600 worth of shares in the company.

Wonder why he’s buying?

The purchase of 32,000 shares adds to his holding of more than 50 million shares, with a value of around $285 million, which incidentally is more than half the company.

As my colleague Claude Walker wrote in August, “Servcorp continues to be an awesome investment”. And it seems Mr Moufarrige shares Claude’s sentiments.

After doubling in size over the past four years, Servcorp could be on track to repeat that feat over the next five.

As the company says, “Revenue growth is gathering momentum” and “margins are improving”. The company also doesn’t appear all that happy with the performance of its serviced offices in Australia and Singapore, saying they need to improve.

With like for like vacancy levels at 79%, the company sees another opportunity to improve its margins and operating results. Servcorp says it expects to add 10% to office capacity this financial year, and net profit profit before tax to “improve by no less than 15%”.

The company is also forecasting a dividend of 22 cents, 10% higher than in the 2014 financial year. Not only that, but Servcorp is sitting on around $93.5 million in cash, around 95 cents per share, and has very little debt.

Currently trading on a P/E ratio of around 21 and paying a partly franked dividend yield of 3.5%, Servcorp may be cheap, given its potential.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned, but wishes he did. You can follow Mike on Twitter @TMFKinga

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