Do Insiders Own Lots Of Shares In DreamEast Group Limited (HKG:593)?

If you want to know who really controls DreamEast Group Limited (HKG:593), then you’ll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes “a business with enduring competitive advantages that is run by able and owner-oriented people.” So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

DreamEast Group is not a large company by global standards. It has a market capitalization of HK$1.1b, which means it wouldn’t have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are not on the share registry. Let’s delve deeper into each type of owner, to discover more about DreamEast Group.

See our latest analysis for DreamEast Group

ownership-breakdown
SEHK:593 Ownership Breakdown July 27th 2020

What Does The Lack Of Institutional Ownership Tell Us About DreamEast Group?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don’t attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. Alternatively, there might be something about the company that has kept institutional investors away. DreamEast Group might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

earnings-and-revenue-growth
SEHK:593 Earnings and Revenue Growth July 27th 2020

We note that hedge funds don’t have a meaningful investment in DreamEast Group. From our data, we infer that the largest shareholder is Zheng Zhou (who also holds the title of Top Key Executive) with 72% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we’re glad to see a company insider play the role of a key stakeholder. China Construction Bank Corporation is the second largest shareholder, holding 0.7%.

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of DreamEast Group

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 information suggests that insiders own more than half of DreamEast Group Limited. This gives them effective control of the company. That means they own HK$800m worth of shares in the HK$1.1b company. That’s quite meaningful. Most would argue this is a positive, showing strong alignment with shareholders. 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 593. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For instance, we’ve identified 3 warning signs for DreamEast Group (2 are a bit unpleasant) that you should be aware of.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

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