The recent pullback must have dismayed Shanghai Kindly Medical Instruments Co., Ltd. (HKG:1501) insiders who own 30% of the company

By
Simply Wall St
Published
January 07, 2022
SEHK:1501
Source: Shutterstock

Every investor in Shanghai Kindly Medical Instruments Co., Ltd. (HKG:1501) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 30% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, insiders endured the biggest losses as the stock fell by 13%.

Let's take a closer look to see what the different types of shareholders can tell us about Shanghai Kindly Medical Instruments.

View our latest analysis for Shanghai Kindly Medical Instruments

ownership-breakdown
SEHK:1501 Ownership Breakdown January 7th 2022

What Does The Institutional Ownership Tell Us About Shanghai Kindly Medical Instruments?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Shanghai Kindly Medical Instruments does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Shanghai Kindly Medical Instruments' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SEHK:1501 Earnings and Revenue Growth January 7th 2022

Shanghai Kindly Medical Instruments is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Shanghai Kindly Enterprise Development Group Co.,LTD. with 26% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.3% and 6.8%, of the shares outstanding, respectively. Additionally, the company's CEO Dongke Liang directly holds 5.7% of the total shares outstanding.

On looking further, we found that 52% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. 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 Shanghai Kindly Medical Instruments

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.

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.

It seems insiders own a significant proportion of Shanghai Kindly Medical Instruments Co., Ltd.. Insiders have a HK$989m stake in this HK$3.3b 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

With a 10% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shanghai Kindly Medical Instruments. 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 Equity Ownership

Private equity firms hold a 16% stake in Shanghai Kindly Medical Instruments. This suggests they can be influential in key policy decisions. 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.

Private Company Ownership

We can see that Private Companies own 3.6%, 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.

Public Company Ownership

It appears to us that public companies own 26% of Shanghai Kindly Medical Instruments. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Shanghai Kindly Medical Instruments (of which 1 makes us a bit uncomfortable!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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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