Insiders of China Medical System Holdings Limited (HKG:867) must be frustrated after market cap dropped HK$659m since recent purchases

Key Insights

• Significant insider control over China Medical System Holdings implies vested interests in company growth
• The top 2 shareholders own 50% of the company
• Recent purchases by insiders

A look at the shareholders of China Medical System Holdings Limited (HKG:867) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual insiders with 50% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Notably, insiders have bought shares recently. Their expectations, however, were not satisfied, as the market cap dropped to HK$17b over the past week.

In the chart below, we zoom in on the different ownership groups of China Medical System Holdings.

See our latest analysis for China Medical System Holdings

What Does The Institutional Ownership Tell Us About China Medical System Holdings?

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.

China Medical System Holdings already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of China Medical System Holdings, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in China Medical System Holdings. With a 47% stake, CEO Kong Lam is the largest shareholder. In comparison, the second and third largest shareholders hold about 2.9% and 2.1% of the stock. Interestingly, the second-largest shareholder, Hongbing Chen is also Chief Operating Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.

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.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of China Medical System Holdings

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.

Our information suggests that insiders own more than half of China Medical System Holdings Limited. This gives them effective control of the company. Given it has a market cap of HK$17b, that means insiders have a whopping HK$8.7b worth of shares in their own names. It is good to see this level of investment. You can check here to see if those insiders have been selling any of their shares.

General Public Ownership

The general public-- including retail investors -- own 29% 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.

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 2 warning signs for China Medical System Holdings you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com