Could The 51 Credit Card Inc. (HKG:2051) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
September 01, 2021
SEHK:2051
Source: Shutterstock

Every investor in 51 Credit Card Inc. (HKG:2051) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

51 Credit Card is a smaller company with a market capitalization of HK$1.2b, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have not yet purchased much of the company. We can zoom in on the different ownership groups, to learn more about 51 Credit Card.

See our latest analysis for 51 Credit Card

ownership-breakdown
SEHK:2051 Ownership Breakdown September 1st 2021

What Does The Lack Of Institutional Ownership Tell Us About 51 Credit Card?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. Alternatively, there might be something about the company that has kept institutional investors away. 51 Credit Card's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

earnings-and-revenue-growth
SEHK:2051 Earnings and Revenue Growth September 1st 2021

We note that hedge funds don't have a meaningful investment in 51 Credit Card. Hong Kong Xinhu Investment Co., Limited is currently the company's largest shareholder with 15% of shares outstanding. With 14% and 9.5% of the shares outstanding respectively, Shen Guojun and Tiantu Investments Limited are the second and third largest shareholders.

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.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of 51 Credit Card

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

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems insiders own a significant proportion of 51 Credit Card Inc.. Insiders have a HK$269m stake in this HK$1.2b business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, with a 27% stake in the company, will not 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 15%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

We can see that Private Companies own 22%, 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:

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. Be aware that 51 Credit Card is showing 3 warning signs in our investment analysis , and 2 of those are potentially serious...

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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