Is Tao Heung Holdings Limited's (HKG:573) Shareholder Ownership Skewed Towards Insiders?

By
Simply Wall St
Published
October 27, 2020

If you want to know who really controls Tao Heung Holdings Limited (HKG:573), then you'll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Tao Heung Holdings is not a large company by global standards. It has a market capitalization of HK$854m, which means it wouldn't have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are not really that prevalent on the share registry. We can zoom in on the different ownership groups, to learn more about Tao Heung Holdings.

Check out our latest analysis for Tao Heung Holdings

SEHK:573 Ownership Breakdown October 27th 2020

What Does The Lack Of Institutional Ownership Tell Us About Tao Heung 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. Alternatively, there might be something about the company that has kept institutional investors away. Tao Heung Holdings might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

SEHK:573 Earnings and Revenue Growth October 27th 2020

We note that hedge funds don't have a meaningful investment in Tao Heung Holdings. Looking at our data, we can see that the largest shareholder is the CEO Wai Chung with 41% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 10% by the third-largest shareholder. Interestingly, the second-largest shareholder, Ka Wong is also Top Key Executive, again, pointing towards 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 52% stake.

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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Tao Heung Holdings

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

Our information suggests that insiders own more than half of Tao Heung Holdings Limited. This gives them effective control of the company. Given it has a market cap of HK$854m, that means they have HK$501m worth of shares. 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 31% ownership, the general public have some degree of sway over Tao Heung Holdings. 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

It seems that Private Companies own 10%, of the Tao Heung Holdings 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 Tao Heung Holdings , 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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