Do Insiders Own Lots Of Shares In Raffles Education Corporation Limited (SGX:NR7)?

A look at the shareholders of Raffles Education Corporation Limited (SGX:NR7) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.

Raffles Education is not a large company by global standards. It has a market capitalization of S$121m, which means it wouldn’t have the attention of many institutional investors. In the chart below, we can see that institutional investors have not yet purchased much of the company. We can zoom in on the different ownership groups, to learn more about Raffles Education.

View 5 warning signs we detected for Raffles Education

SGX:NR7 Ownership Summary, December 24th 2019
SGX:NR7 Ownership Summary, December 24th 2019

What Does The Institutional Ownership Tell Us About Raffles Education?

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.

Less than 5% of Raffles Education 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. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. 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.

SGX:NR7 Income Statement, December 24th 2019
SGX:NR7 Income Statement, December 24th 2019

Raffles Education is not owned by hedge funds. The company’s CEO Hua Seng Chew is the largest shareholder with 26% of shares outstanding. Next, we have Hong Leong Oei and Gim Chung as the second and third largest shareholders, holding 9.8% and 7.4%, of the shares outstanding, respectively.

Additionally, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While it makes sense to study institutional ownership data for a company, It also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Raffles Education

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

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 Raffles Education Corporation Limited. This gives them effective control of the company. So they have a S$61m stake in this S$121m business. Ownership is clearly an important issue when it comes to investment selection. But ultimately, many risks exist within the business itself, rather than its shareholders. For example, we’ve discovered 5 warning signs for Raffles Education (of which 2 are major) which any shareholder or potential investor should be aware of.

General Public Ownership

The general public, with a 38% stake in the company, will not easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 9.3%, of the company’s shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

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.

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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