Could The Fenix Resources Limited (ASX:FEX) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
April 28, 2020
ASX:FEX

If you want to know who really controls Fenix Resources Limited (ASX:FEX), then you'll have to look at the makeup of its share registry. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. 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.

Fenix Resources is not a large company by global standards. It has a market capitalization of AU$15m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Fenix Resources.

View our latest analysis for Fenix Resources

ASX:FEX Ownership Summary April 28th 2020
ASX:FEX Ownership Summary April 28th 2020

What Does The Institutional Ownership Tell Us About Fenix Resources?

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.

We can see that Fenix Resources does have institutional investors; and they hold 7.8% of the stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Fenix Resources's historic earnings and revenue, below, but keep in mind there's always more to the story.

ASX:FEX Income Statement April 28th 2020
ASX:FEX Income Statement April 28th 2020

We note that hedge funds don't have a meaningful investment in Fenix Resources. Our data shows that Gavin Argyle is the largest shareholder with 4.8% of shares outstanding. The second and third largest shareholders are Euroclear PLC, Asset Management Arm and Swiss Asia Capital (S) Pte. Ltd, each holding around 2.8% of the shares outstanding.

Our studies suggest that the top 20 shareholders collectively control less than 50% of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Fenix Resources

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

It seems insiders own a significant proportion of Fenix Resources Limited. Insiders have a AU$3.0m stake in this AU$15m business. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly retail investors, hold a substantial 63% stake in FEX, suggesting it is a fairly popular stock. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

We can see that Private Companies own 9.1%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private 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. Be aware that Fenix Resources is showing 4 warning signs in our investment analysis , and 3 of those are significant...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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