Can We See Significant Institutional Ownership On The SBS Transit Ltd (SGX:S61) Share Register?

The big shareholder groups in SBS Transit Ltd (SGX:S61) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. We also tend to see lower insider ownership in companies that were previously publicly owned.

SBS Transit is not a large company by global standards. It has a market capitalization of S$1.0b, which means it wouldn’t have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about SBS Transit.

View our latest analysis for SBS Transit

SGX:S61 Ownership Summary, March 4th 2020
SGX:S61 Ownership Summary, March 4th 2020

What Does The Institutional Ownership Tell Us About SBS Transit?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that SBS Transit does have institutional investors; and they hold 5.3% of the stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see SBS Transit’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SGX:S61 Income Statement, March 4th 2020
SGX:S61 Income Statement, March 4th 2020

Hedge funds don’t have many shares in SBS Transit. ComfortDelGro Corporation Limited is currently the largest shareholder, with 74% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. With 3.4% and 1.2% of the shares outstanding respectively, Standard Life Aberdeen plc and FIL Limited are the second and third largest shareholders.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of SBS Transit

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our data suggests that insiders own under 1% of SBS Transit Ltd in their own names. It appears that the board holds about S$9.5m worth of stock. This compares to a market capitalization of S$1.0b. I generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

With a 19% ownership, the general public have some degree of sway over S61. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Public Company Ownership

It appears to us that public companies own 74% of S61. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we’ve spotted with SBS Transit .

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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