Can We See Significant Insider Ownership On The Tern Properties Company Limited (HKG:277) Share Register?

By
Simply Wall St
Published
March 04, 2020
SEHK:277

The big shareholder groups in Tern Properties Company Limited (HKG:277) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

With a market capitalization of HK$1.2b, Tern Properties is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are not on the share registry. We can zoom in on the different ownership groups, to learn more about Tern Properties.

Check out our latest analysis for Tern Properties

SEHK:277 Ownership Summary, March 5th 2020
SEHK:277 Ownership Summary, March 5th 2020

What Does The Lack Of Institutional Ownership Tell Us About Tern Properties?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. Alternatively, there might be something about the company that has kept institutional investors away. Tern Properties'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.

SEHK:277 Income Statement, March 5th 2020
SEHK:277 Income Statement, March 5th 2020

Tern Properties is not owned by hedge funds. Noranger Company Limited is currently the company's largest shareholder with 53% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. The second largest shareholder with 12%, is Hoi Sow Chan, followed by Evergrade Investments Limited, with an ownership of 9.3%. Hoi Sow Chan also happens to hold the title of Chief Executive Officer.

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. 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 Tern Properties

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own a reasonable proportion of Tern Properties Company Limited. Insiders have a HK$212m stake in this HK$1.2b business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, with a 20% stake in the company, will not 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 Company Ownership

Our data indicates that Private Companies hold 62%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Tern Properties better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Tern Properties .

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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