Natural Beauty Bio-Technology Limited's (HKG:157) last week's 10% decline must have disappointed private companies who have a significant stake

Key Insights

• The considerable ownership by private companies in Natural Beauty Bio-Technology indicates that they collectively have a greater say in management and business strategy
• 53% of the business is held by the top 2 shareholders
• 37% of Natural Beauty Bio-Technology is held by insiders

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To get a sense of who is truly in control of Natural Beauty Bio-Technology Limited (HKG:157), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 38% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While the holdings of private companies took a hit after last week’s 10% price drop, insiders with their 37% also suffered.

In the chart below, we zoom in on the different ownership groups of Natural Beauty Bio-Technology.

See our latest analysis for Natural Beauty Bio-Technology

What Does The Lack Of Institutional Ownership Tell Us About Natural Beauty Bio-Technology?

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. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Natural Beauty Bio-Technology might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

We note that hedge funds don't have a meaningful investment in Natural Beauty Bio-Technology. Our data shows that Far Eastern Silo & Shipping (Panama) S.A. is the largest shareholder with 30% of shares outstanding. With 23% and 15% of the shares outstanding respectively, Shih-Heng Chao and Yen-Yu Tsai are the second and third largest shareholders. Yen-Yu Tsai, who is the third-largest shareholder, also happens to hold the title of Chairman Emeritus.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Natural Beauty Bio-Technology

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 most recent data indicates that insiders own a reasonable proportion of Natural Beauty Bio-Technology Limited. Insiders have a HK$388m stake in this HK$1.0b business. We 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

The general public, who are usually individual investors, hold a 25% stake in Natural Beauty Bio-Technology. 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

Our data indicates that Private Companies hold 38%, of the company's shares. 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. Case in point: We've spotted 1 warning sign for Natural Beauty Bio-Technology you should be aware of.

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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.