Is Shanghai Zendai Property Limited's (HKG:755) Shareholder Ownership Skewed Towards Insiders?

By
Simply Wall St
Published
May 24, 2021
SEHK:755
Source: Shutterstock

If you want to know who really controls Shanghai Zendai Property Limited (HKG:755), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. 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$1.1b, Shanghai Zendai Property 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 don't own shares in the company. Let's delve deeper into each type of owner, to discover more about Shanghai Zendai Property.

Check out our latest analysis for Shanghai Zendai Property

ownership-breakdown
SEHK:755 Ownership Breakdown May 25th 2021

What Does The Lack Of Institutional Ownership Tell Us About Shanghai Zendai Property?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Shanghai Zendai Property'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:755 Earnings and Revenue Growth May 25th 2021

Shanghai Zendai Property is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Nantong Sanjian Holdings (Group) Co., Ltd. with 30% of shares outstanding. In comparison, the second and third largest shareholders hold about 18% and 15% of the stock.

After doing some more digging, we found that the top 3 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. 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 Shanghai Zendai Property

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.

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 most recent data indicates that insiders own a reasonable proportion of Shanghai Zendai Property Limited. Insiders have a HK$161m stake in this HK$1.1b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public holds a 37% stake in Shanghai Zendai Property. 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.

Private Company Ownership

It seems that Private Companies own 48%, of the Shanghai Zendai Property stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Shanghai Zendai Property you should be aware of, and 1 of them is concerning.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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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