Stock Analysis

Is China Shengmu Organic Milk Limited's (HKG:1432) Shareholder Ownership Skewed Towards Insiders?

SEHK:1432
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Every investor in China Shengmu Organic Milk Limited (HKG:1432) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. 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.

China Shengmu Organic Milk isn't enormous, but it's not particularly small either. It has a market capitalization of HK$7.0b, which means it would generally expect to see some institutions on the share registry. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about China Shengmu Organic Milk.

View our latest analysis for China Shengmu Organic Milk

ownership-breakdown
SEHK:1432 Ownership Breakdown January 10th 2021

What Does The Institutional Ownership Tell Us About China Shengmu Organic Milk?

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.

China Shengmu Organic Milk already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of China Shengmu Organic Milk, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
SEHK:1432 Earnings and Revenue Growth January 10th 2021

China Shengmu Organic Milk is not owned by hedge funds. The company's largest shareholder is China Mengniu Dairy Company Limited, with ownership of 18%. Meanwhile, the second and third largest shareholders, hold 16% and 6.4%, of the shares outstanding, respectively. In addition, we found that Jiawang Zhang, the CEO has 1.6% of the shares allocated to their name.

We did some more digging and found that 6 of the top shareholders account for roughly 54% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 China Shengmu Organic Milk

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. 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 most recent data indicates that insiders own a reasonable proportion of China Shengmu Organic Milk Limited. It has a market capitalization of just HK$7.0b, and insiders have HK$1.6b worth of shares in their own names. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 44% ownership, the general public have some degree of sway over China Shengmu Organic Milk. 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

It seems that Private Companies own 6.4%, of the China Shengmu Organic Milk stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

Public companies currently own 18% of China Shengmu Organic Milk stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand China Shengmu Organic Milk better, we need to consider many other factors. Be aware that China Shengmu Organic Milk is showing 5 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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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