Every investor in Hong Fok Corporation Limited (SGX:H30) should be aware of the most powerful shareholder groups. 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.
Hong Fok is not a large company by global standards. It has a market capitalization of S$692m, 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. Let’s delve deeper into each type of owner, to discover more about Hong Fok.
What Does The Institutional Ownership Tell Us About Hong Fok?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Less than 5% of Hong Fok 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 company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. 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.
We note that hedge funds don’t have a meaningful investment in Hong Fok. Looking at our data, we can see that the largest shareholder is Hong Fok Land Holding Limited with 21% of shares outstanding. Sim Eng Cheong is the second largest shareholder with 13% of common stock, followed by Kim Pong Cheong, holding 12% of the stock. Sim Eng Cheong also happens to hold the title of Co-Chief Executive Officer.
A deeper analysis brings to light the fact that 57% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.
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 Hong Fok
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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 most recent data indicates that insiders own a reasonable proportion of Hong Fok Corporation Limited. It has a market capitalization of just S$692m, and insiders have S$231m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
The general public holds a 25% stake in H30. 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
It seems that Private Companies own 38%, of the H30 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.
It’s always worth thinking about the different groups who own shares in a company. But to understand Hong Fok better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Hong Fok .
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 email@example.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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