Private companies in China Communications Construction Company Limited (HKG:1800) are its biggest bettors, and their bets paid off as stock gained 3.2% last week

Key Insights

• Significant control over China Communications Construction by private companies implies that the general public has more power to influence management and governance-related decisions
• 59% of the company is held by a single shareholder (China Communications Construction Group (Ltd.))
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in China Communications Construction Company Limited (HKG:1800) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 60% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies were the biggest beneficiaries of last week’s 3.2% gain.

Let's take a closer look to see what the different types of shareholders can tell us about China Communications Construction.

Check out our latest analysis for China Communications Construction

What Does The Institutional Ownership Tell Us About China Communications Construction?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in China Communications Construction. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of China Communications Construction, (below). Of course, keep in mind that there are other factors to consider, too.

China Communications Construction is not owned by hedge funds. China Communications Construction Group (Ltd.) is currently the largest shareholder, with 59% of shares outstanding. This implies that they have majority interest control of the future of the company. Meanwhile, the second and third largest shareholders, hold 3.0% and 0.6%, of the shares outstanding, respectively.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of China Communications Construction

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

We note our data does not show any board members holding shares, personally. It is rare to see such a low level of personal ownership, amongst the board (and it is possible that our data might be incomplete). Concerned investors should check here to see if insiders have been selling or buying.

General Public Ownership

The general public, who are usually individual investors, hold a 34% stake in China Communications Construction. 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.

Private Company Ownership

Our data indicates that Private Companies hold 60%, of the company's shares. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand China Communications Construction better, we need to consider many other factors. For instance, we've identified 2 warning signs for China Communications Construction (1 is significant) that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.