Kunlun Energy Company Limited's (HKG:135) stock price dropped 4.6% last week; private companies would not be happy

By
Simply Wall St
Published
January 21, 2022
SEHK:135
Source: Shutterstock

To get a sense of who is truly in control of Kunlun Energy Company Limited (HKG:135), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 58% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private companies as a group endured the highest losses last week after market cap fell by HK$3.1b.

Let's take a closer look to see what the different types of shareholders can tell us about Kunlun Energy.

Check out our latest analysis for Kunlun Energy

ownership-breakdown
SEHK:135 Ownership Breakdown January 21st 2022

What Does The Institutional Ownership Tell Us About Kunlun Energy?

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.

Kunlun Energy 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 Kunlun Energy's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SEHK:135 Earnings and Revenue Growth January 21st 2022

We note that hedge funds don't have a meaningful investment in Kunlun Energy. The company's largest shareholder is China National Petroleum Corporation, with ownership of 58%. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. In comparison, the second and third largest shareholders hold about 1.7% and 1.6% of the stock.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Kunlun Energy

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. 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.

We note our data does not show any board members holding shares, personally. It is rare to see such a low level of personal ownership, amongst the board (and it is possible that our data might be incomplete). Concerned investors should check here to see if insiders have been selling or buying.

General Public Ownership

The general public, who are usually individual investors, hold a 25% stake in Kunlun Energy. 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 58%, of the Kunlun Energy stock. 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 Kunlun Energy better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Kunlun Energy (including 1 which 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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