Could The South China Holdings Company Limited (HKG:413) Ownership Structure Tell Us Something Useful?

Every investor in South China Holdings Company Limited (HKG:413) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.

With a market capitalization of HK$1.9b, South China Holdings is a small cap stock, so it might not be well known by many institutional investors. 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 South China Holdings.

View our latest analysis for South China Holdings

What Does The Lack Of Institutional Ownership Tell Us About South China Holdings?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. South China Holdings' earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

We note that hedge funds don't have a meaningful investment in South China Holdings. Our data suggests that Hung Sang Ng, who is also the company's Top Key Executive, holds the most number of shares at 42%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. Meanwhile, the second and third largest shareholders, hold 18% and 5.0%, of the shares outstanding, respectively. Interestingly, the third-largest shareholder, Yuk Fung Ng is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 60% stake.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of South China Holdings

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. 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.

Our most recent data indicates that insiders own the majority of South China Holdings Company Limited. This means they can collectively make decisions for the company. So they have a HK$962m stake in this HK$1.9b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 29% ownership, the general public have some degree of sway over South China Holdings. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

We can see that Private Companies own 18%, of the shares on issue. 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 South China Holdings better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with South China Holdings (including 1 which is significant) .

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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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