Stock Analysis

Guotai Junan International Holdings Limited's (HKG:1788) stock price dropped 13% last week; public companies would not be happy

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Key Insights

  • Significant control over Guotai Junan International Holdings by public companies implies that the general public has more power to influence management and governance-related decisions
  • 74% of the company is held by a single shareholder (Guotai Junan Securities Co., Ltd.)
  • Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls Guotai Junan International Holdings Limited (HKG:1788), then you'll have to look at the makeup of its share registry. With 74% stake, public companies possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, public companies as a group endured the highest losses last week after market cap fell by HK$860m.

In the chart below, we zoom in on the different ownership groups of Guotai Junan International Holdings.

See our latest analysis for Guotai Junan International Holdings

SEHK:1788 Ownership Breakdown March 15th 2023

What Does The Institutional Ownership Tell Us About Guotai Junan International 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 Guotai Junan International Holdings. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Guotai Junan International Holdings' earnings history below. Of course, the future is what really matters.

SEHK:1788 Earnings and Revenue Growth March 15th 2023

Hedge funds don't have many shares in Guotai Junan International Holdings. Looking at our data, we can see that the largest shareholder is Guotai Junan Securities Co., Ltd. with 74% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Meanwhile, the second and third largest shareholders, hold 1.5% and 0.9%, of the shares outstanding, respectively.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Guotai Junan International Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 information suggests that Guotai Junan International Holdings Limited insiders own under 1% of the company. It seems the board members have no more than HK$49m worth of shares in the HK$6.0b company. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 20% 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.

Public Company Ownership

Public companies currently own 74% of Guotai Junan International Holdings stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Guotai Junan International Holdings better, we need to consider many other factors. For example, we've discovered 3 warning signs for Guotai Junan International Holdings that you should be aware of before investing here.

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.

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