Stock Analysis

Positive week for Tongcheng Travel Holdings Limited (HKG:780) institutional investors who lost 7.0% over the past year

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SEHK:780
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If you want to know who really controls Tongcheng Travel Holdings Limited (HKG:780), then you'll have to look at the makeup of its share registry. With 33% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Last week's HK$2.5b market cap gain would probably be appreciated by institutional investors, especially after a year of 7.0% losses.

In the chart below, we zoom in on the different ownership groups of Tongcheng Travel Holdings.

Our analysis indicates that 780 is potentially undervalued!

ownership-breakdown
SEHK:780 Ownership Breakdown November 30th 2022

What Does The Institutional Ownership Tell Us About Tongcheng Travel Holdings?

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.

As you can see, institutional investors have a fair amount of stake in Tongcheng Travel Holdings. 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 Tongcheng Travel Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SEHK:780 Earnings and Revenue Growth November 30th 2022

Hedge funds don't have many shares in Tongcheng Travel Holdings. Trip.com Group Limited is currently the company's largest shareholder with 21% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 14% and 7.4%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Tongcheng Travel Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 some shares in Tongcheng Travel Holdings Limited. The insiders have a meaningful stake worth HK$411m. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 23% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

With an ownership of 14%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Public Company Ownership

Public companies currently own 28% of Tongcheng Travel Holdings stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Tongcheng Travel Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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