Could The West China Cement Limited (HKG:2233) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
January 21, 2021

Every investor in West China Cement Limited (HKG:2233) 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. 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.

West China Cement has a market capitalization of HK$6.8b, so we would expect some institutional investors to have noticed the stock. In the chart below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about West China Cement.

View our latest analysis for West China Cement

SEHK:2233 Ownership Breakdown January 21st 2021

What Does The Institutional Ownership Tell Us About West China Cement?

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.

West China Cement already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 West China Cement's historic earnings and revenue below, but keep in mind there's always more to the story.

SEHK:2233 Earnings and Revenue Growth January 21st 2021

Hedge funds don't have many shares in West China Cement. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In West China Cement's case, its Top Key Executive, Jimin Zhang, is the largest shareholder, holding 32% of shares outstanding. With 21% and 7.9% of the shares outstanding respectively, Anhui Conch Cement Company Limited and GIC Pte. Ltd. are the second and third largest shareholders.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 53% stake.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of West China Cement

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 information suggests that insiders maintain a significant holding in West China Cement Limited. Insiders have a HK$2.5b stake in this HK$6.8b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, with a 15% 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.

Public Company Ownership

Public companies currently own 21% of West China Cement stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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 would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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. 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.
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