Could The Kina Petroleum Corporation (ASX:KPE) Ownership Structure Tell Us Something Useful?

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The big shareholder groups in Kina Petroleum Corporation (ASX:KPE) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.’

With a market capitalization of AU$618m, Kina Petroleum is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions are not really that prevalent on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about KPE.

Check out our latest analysis for Kina Petroleum

ASX:KPE Ownership Summary, May 9th 2019
ASX:KPE Ownership Summary, May 9th 2019

What Does The Institutional Ownership Tell Us About Kina Petroleum?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Less than 5% of Kina Petroleum is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

ASX:KPE Income Statement, May 9th 2019
ASX:KPE Income Statement, May 9th 2019

Hedge funds don’t have many shares in Kina Petroleum. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Kina Petroleum

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 most recent data indicates that insiders own a reasonable proportion of Kina Petroleum Corporation. Insiders have a AU$269m stake in this AU$618m business. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 27% ownership, the general public have some degree of sway over KPE. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

Our data indicates that Private Companies hold 25%, of the company’s shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Kina Petroleum better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .

If you would prefer check out another company — one with potentially superior financials — then do not miss thisfree list of interesting companies, backed by strong financial data.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.