Why All Asia Asset Capital Limited’s (LON:AAA) Ownership Structure Is Important

In this article, I will take a quick look at All Asia Asset Capital Limited’s (AIM:AAA) recent ownership structure – an unconventional investing subject, but an important one. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Therefore, I will take a look at AAA’s shareholders in more detail.

View our latest analysis for All Asia Asset Capital
AIM:AAA Ownership_summary Jan 11th 18
AIM:AAA Ownership_summary Jan 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. With an institutional ownership of 3.45%, AAA doesn’t seem too exposed to higher volatility resulting from institutional trading. Less covered stocks like AAA used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more popularity.

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. AAA insiders hold a significant stake of 34.06% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.

General Public Ownership

The general public holds a substantial 62.49% stake in AAA, making it a highly popular stock among retail investors. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

What this means for you:

Institutional ownership in AAA 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 AAA, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as All Asia Asset Capital’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:

    1. Financial Health: Is AAA’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. Valuation: What is AAA worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether AAA is currently mispriced by the market.

    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.