Do Insiders Own Shares In RMH Holdings Limited (HKG:8437)?

The big shareholder groups in RMH Holdings Limited (HKG:8437) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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 HK$84m, RMH Holdings is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have not yet purchased shares. Let’s delve deeper into each type of owner, to discover more about RMH Holdings.

View our latest analysis for RMH Holdings

SEHK:8437 Ownership Summary, January 24th 2020
SEHK:8437 Ownership Summary, January 24th 2020

What Does The Lack Of Institutional Ownership Tell Us About RMH Holdings?

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. On the other hand, it’s always possible that professional investors are avoiding a company because they don’t think it’s the best place for their money. RMH Holdings’s earnings and revenue track record (below) may not be compelling to institutional investors — or they simply might not have looked at the business closely.

SEHK:8437 Income Statement, January 24th 2020
SEHK:8437 Income Statement, January 24th 2020

RMH Holdings is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Brisk Success Holdings Limited with 52% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. The second and third largest shareholders are Zhichun Ye and Chun Yu Wong, holding 5.9% and 4.7%, respectively.

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 RMH Holdings

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders maintain a significant holding in RMH Holdings Limited. Insiders have a HK$16m stake in this HK$84m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public holds a 30% stake in 8437. 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

It seems that Private Companies own 52%, of the 8437 stock. 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. To that end, you should learn about the 3 warning signs we’ve spotted with RMH Holdings (including 1 which is is concerning) .

If you would prefer check out another company — one with potentially superior financials — then do not miss this free 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.

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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