In this analysis, my focus will be on developing a perspective on China Resources Pharmaceutical Group Limited’s (HKG:3320) latest ownership structure, a less discussed, but important factor. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, it is beneficial for us to examine 3320’s ownership structure in more detail.
Institutional OwnershipDue to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. A low institutional ownership of 6.66% puts 3320 on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Despite 3320 being a well-covered company with 10 analysts reporting on it, a low institutional ownership indicates that, perhaps, this group of investors simply do not see it as an interesting opportunity.
General Public OwnershipThe general public holds a substantial 22.88% stake in 3320, making it a highly popular stock among retail investors. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company OwnershipPotential investors in 3320 should also look at another important group of investors: private companies, with a stake of 70.46%, who are primarily invested because of strategic and capital gain interests. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect 3320’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
With a low level of institutional ownership, investors in 3320 need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, ownership structure should not be the only focus of your research when constructing an investment thesis around 3320. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of China Resources Pharmaceutical Group’s share price. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for 3320’s future growth? Take a look at our free research report of analyst consensus for 3320’s outlook.
- Financial Health: Are 3320’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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 email@example.com.