Could The Guangzhou Rural Commercial Bank Co., Ltd. (HKG:1551) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
August 21, 2020
SEHK:1551

The big shareholder groups in Guangzhou Rural Commercial Bank Co., Ltd. (HKG:1551) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

Guangzhou Rural Commercial Bank has a market capitalization of HK$31b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Taking a look at our data on the ownership groups (below), it seems that institutions don't own many shares in the company. We can zoom in on the different ownership groups, to learn more about Guangzhou Rural Commercial Bank.

See our latest analysis for Guangzhou Rural Commercial Bank

ownership-breakdown
SEHK:1551 Ownership Breakdown August 22nd 2020

What Does The Institutional Ownership Tell Us About Guangzhou Rural Commercial Bank?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Institutions have a very small stake in Guangzhou Rural Commercial Bank. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

earnings-and-revenue-growth
SEHK:1551 Earnings and Revenue Growth August 22nd 2020

Guangzhou Rural Commercial Bank is not owned by hedge funds. Guangzhou Finance Holdings Group Co., Ltd is currently the company's largest shareholder with 3.7% of shares outstanding. With 3.4% and 3.3% of the shares outstanding respectively, Guangzhou Water Investment Group Co., Ltd. and Guangzhou Vanlead Group Co.,Ltd. are the second and third largest shareholders.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Guangzhou Rural Commercial Bank

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Shareholders would probably be interested to learn that insiders own shares in Guangzhou Rural Commercial Bank Co., Ltd.. The insiders have a meaningful stake worth HK$2.3b. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public -- mostly retail investors -- own 58% of Guangzhou Rural Commercial Bank. 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

It seems that Private Companies own 29%, of the Guangzhou Rural Commercial Bank 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Guangzhou Rural Commercial Bank , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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