Could The CST Group Limited (HKG:985) Ownership Structure Tell Us Something Useful?

The big shareholder groups in CST Group Limited (HKG:985) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in 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.

With a market capitalization of HK$813m, CST Group is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have not yet purchased much of the company. Let's delve deeper into each type of owner, to discover more about CST Group.

Check out our latest analysis for CST Group

What Does The Lack Of Institutional Ownership Tell Us About CST Group?

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 many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. 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. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of CST Group, for yourself, below.

CST Group is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In CST Group's case, its Top Key Executive, Tao Chiu, is the largest shareholder, holding 75% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.0% and 0.8%, of the shares outstanding, respectively.

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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of CST Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 information suggests that insiders own more than half of CST Group Limited. This gives them effective control of the company. So they have a HK$648m stake in this HK$813m business. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public, with a 20% stake in the company, will not easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand CST Group better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with CST Group (including 1 which is is a bit unpleasant) .

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. 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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