Individual investors in Hua Medicine (Shanghai) Ltd. (HKG:2552) are its biggest bettors, and their bets paid off as stock gained 11% last week

Published
June 24, 2022
SEHK:2552
Source: Shutterstock

To get a sense of who is truly in control of Hua Medicine (Shanghai) Ltd. (HKG:2552), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 47% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, individual investors were the biggest beneficiaries of last week’s 11% gain.

Let's take a closer look to see what the different types of shareholders can tell us about Hua Medicine (Shanghai).

See our latest analysis for Hua Medicine (Shanghai)

ownership-breakdown
SEHK:2552 Ownership Breakdown June 24th 2022

What Does The Institutional Ownership Tell Us About Hua Medicine (Shanghai)?

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.

Hua Medicine (Shanghai) 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Hua Medicine (Shanghai)'s earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
SEHK:2552 Earnings and Revenue Growth June 24th 2022

We note that hedge funds don't have a meaningful investment in Hua Medicine (Shanghai). Looking at our data, we can see that the largest shareholder is Arch Venture Partners, L.P. with 13% of shares outstanding. VR Adviser, LLC is the second largest shareholder owning 11% of common stock, and WuXi PharmaTech Healthcare Fund I General Partner L.P. holds about 7.7% of the company stock. In addition, we found that Li Chen, the CEO has 3.9% of the shares allocated to their name.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Hua Medicine (Shanghai)

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. 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.

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.

We can see that insiders own shares in Hua Medicine (Shanghai) Ltd.. It has a market capitalization of just HK$3.8b, and insiders have HK$181m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 47% stake in the company, and hence can't easily be ignored. 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

With an ownership of 31%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Hua Medicine (Shanghai) better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Hua Medicine (Shanghai) (of which 1 makes us a bit uncomfortable!) you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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