Is Guangzhou R&F Properties Co., Ltd. (HKG:2777) Popular Amongst Insiders?

By
Simply Wall St
Published
July 18, 2021
SEHK:2777
Source: Shutterstock

A look at the shareholders of Guangzhou R&F Properties Co., Ltd. (HKG:2777) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. 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.

Guangzhou R&F Properties is a pretty big company. It has a market capitalization of HK$32b. Normally institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Guangzhou R&F Properties.

See our latest analysis for Guangzhou R&F Properties

ownership-breakdown
SEHK:2777 Ownership Breakdown July 19th 2021

What Does The Institutional Ownership Tell Us About Guangzhou R&F Properties?

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.

Guangzhou R&F Properties already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Guangzhou R&F Properties' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SEHK:2777 Earnings and Revenue Growth July 19th 2021

Hedge funds don't have many shares in Guangzhou R&F Properties. The company's largest shareholder is Sze Lim Li, with ownership of 29%. In comparison, the second and third largest shareholders hold about 27% and 1.7% of the stock. Li Zhang, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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 Guangzhou R&F Properties

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

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.

It seems that insiders own more than half the Guangzhou R&F Properties Co., Ltd. stock. This gives them a lot of power. That means insiders have a very meaningful HK$18b stake in this HK$32b business. 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, with a 31% 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.

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 4 warning signs for Guangzhou R&F Properties you should be aware of, and 1 of them is concerning.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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