Insiders of China Medical System Holdings Limited (HKG:867) must be disappointed as stock fell 4.7% after recent purchases

Key Insights

• Insiders appear to have a vested interest in China Medical System Holdings' growth, as seen by their sizeable ownership
• 51% of the business is held by the top 2 shareholders
• Insiders have bought recently

To get a sense of who is truly in control of China Medical System Holdings Limited (HKG:867), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual insiders with 52% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And looking at our data, we can see that insiders have bought shares recently. However, with shares price down 4.7% last week, they must be disappointed.

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?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in China Medical System Holdings. 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. 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 China Medical System Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in China Medical System Holdings. Looking at our data, we can see that the largest shareholder is the CEO Kong Lam with 48% of shares outstanding. For context, the second largest shareholder holds about 2.9% of the shares outstanding, followed by an ownership of 2.0% by the third-largest shareholder. Interestingly, the second-largest shareholder, Hongbing Chen is also Chief Operating Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders own more than half of China Medical System Holdings Limited. This gives them effective control of the company. Insiders own HK$11b worth of shares in the HK$21b company. That's extraordinary! Most would be pleased to see the board is investing alongside them. You may wish to discover if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 31% stake in China Medical System Holdings. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand China Medical System Holdings better, we need to consider many other factors. For example, we've discovered 2 warning signs for China Medical System Holdings that you should be aware of before investing here.

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.

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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.