Could The SINOPEC Engineering (Group) Co Ltd (HKG:2386) Ownership Structure Tell Us Something Useful?

If you want to know who really controls SINOPEC Engineering (Group) Co Ltd (HKG:2386), then you’ll have to look at the makeup of its share registry. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that used to be publicly owned tend to have lower insider ownership.

SINOPEC Engineering (Group) is a pretty big company. It has a market capitalization of HK$32b. Normally institutions would own a significant portion of a company this size. Taking a look at the our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about 2386.

See our latest analysis for SINOPEC Engineering (Group)

SEHK:2386 Ownership Summary November 24th 18
SEHK:2386 Ownership Summary November 24th 18

What Does The Institutional Ownership Tell Us About SINOPEC Engineering (Group)?

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.

As you can see, institutional investors own 16% of SINOPEC Engineering (Group). 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. 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 SINOPEC Engineering (Group)’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SEHK:2386 Income Statement Export November 24th 18
SEHK:2386 Income Statement Export November 24th 18

We note that hedge funds don’t have a meaningful investment in SINOPEC Engineering (Group). Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of SINOPEC Engineering (Group)

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own less than 1% of SINOPEC Engineering (Group) Co Ltd. But they may have an indirect interest through a corporate structure that we haven’t picked up on. It’s a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own HK$8.7m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, with a 15% stake in the company, will not easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 67%, of the company’s shares. 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:

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.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.