Why Sprintex Limited’s (ASX:SIX) Investor Composition Impacts Your Returns

Today, I will be analyzing Sprintex Limited’s (ASX:SIX) recent ownership structure, an important but not-so-popular subject among individual investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Now I will analyze SIX’s shareholder registry in more detail.

Check out our latest analysis for Sprintex
ASX:SIX Ownership_summary Apr 11th 18
ASX:SIX Ownership_summary Apr 11th 18

Institutional Ownership

Institutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. SIX hardly has any institutional ownership, leaving investors little to think about sharp price volatility in the stock that could take place due to institutional trading.

Insider Ownership

I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. A major group of owners of SIX is individual insiders, sitting with a hefty 30.89% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). Another aspect of insider ownership is to learn about their recent transactions. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
ASX:SIX Insider_trading Apr 11th 18
ASX:SIX Insider_trading Apr 11th 18

General Public Ownership

The general public holds 5.47% stake in SIX, thus, representing an important class of owners. 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 if it aligns with other large shareholders.

Private Company Ownership

Another group of owners that a potential investor in SIX should consider are private companies, with a stake of 63.04%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect SIX’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.

Next Steps:

Institutional ownership in SIX is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, if you are building an investment case for SIX, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Sprintex’s share price. I highly recommend you to complete your research by taking a look at the following:

  • 1. Financial Health: Is SIX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  • 2. Past Track Record: Has SIX been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of SIX’s historicals for more clarity.
  • 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.