Could The Yincheng Life Service CO., Ltd. (HKG:1922) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
October 04, 2020
SEHK:1922

Every investor in Yincheng Life Service CO., Ltd. (HKG:1922) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Yincheng Life Service is a smaller company with a market capitalization of HK$1.9b, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions don't own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about Yincheng Life Service.

Check out our latest analysis for Yincheng Life Service

ownership-breakdown
SEHK:1922 Ownership Breakdown October 5th 2020

What Does The Lack Of Institutional Ownership Tell Us About Yincheng Life Service?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

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. Alternatively, there might be something about the company that has kept institutional investors away. Yincheng Life Service's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

earnings-and-revenue-growth
SEHK:1922 Earnings and Revenue Growth October 5th 2020

We note that hedge funds don't have a meaningful investment in Yincheng Life Service. Qingping Huang is currently the company's largest shareholder with 37% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 13% and 7.1%, of the shares outstanding, respectively. Additionally, the company's CEO Chunling Li directly holds 2.1% of the total shares outstanding.

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.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Yincheng Life Service

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 Yincheng Life Service CO., Ltd.. This gives them effective control of the company. Given it has a market cap of HK$1.9b, that means they have HK$1.4b worth of shares. 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

With a 27% ownership, the general public have some degree of sway over Yincheng Life Service. 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 Yincheng Life Service better, we need to consider many other factors. For example, we've discovered 3 warning signs for Yincheng Life Service that you should be aware of before investing here.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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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