Could The Hengan International Group Company Limited (HKG:1044) Ownership Structure Tell Us Something Useful?

If you want to know who really controls Hengan International Group Company Limited (HKG:1044), then you’ll have to look at the makeup of its share registry. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.’

Hengan International Group has a market capitalization of HK$68b, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. Taking a look at the our data on the ownership groups (below), it’s seems that institutions own shares in the company. Let’s delve deeper into each type of owner, to discover more about 1044.

See our latest analysis for Hengan International Group

SEHK:1044 Ownership Summary January 2nd 19
SEHK:1044 Ownership Summary January 2nd 19

What Does The Institutional Ownership Tell Us About Hengan International Group?

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 own 28% of Hengan International Group. 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 Hengan International Group’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SEHK:1044 Income Statement Export January 2nd 19
SEHK:1044 Income Statement Export January 2nd 19

Hengan International Group is not owned by hedge funds. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Hengan International Group

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.

Our information suggests that insiders maintain a significant holding in Hengan International Group Company Limited. Insiders own HK$29b worth of shares in the HK$68b company. That’s quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 27% ownership, the general public have some degree of sway over 1044. 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.

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.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.