Private companies account for 56% of Guangdong Investment Limited's (HKG:270) ownership, while institutions account for 25%

Published
June 13, 2022
SEHK:270
Source: Shutterstock

A look at the shareholders of Guangdong Investment Limited (HKG:270) can tell us which group is most powerful. We can see that private companies own the lion's share in the company with 56% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutions on the other hand have a 25% ownership in the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies.

In the chart below, we zoom in on the different ownership groups of Guangdong Investment.

Check out our latest analysis for Guangdong Investment

ownership-breakdown
SEHK:270 Ownership Breakdown June 13th 2022

What Does The Institutional Ownership Tell Us About Guangdong Investment?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Guangdong Investment does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Guangdong Investment's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SEHK:270 Earnings and Revenue Growth June 13th 2022

Guangdong Investment is not owned by hedge funds. Guangdong Holdings Limited is currently the company's largest shareholder with 56% of shares outstanding. This implies that they have majority interest control of the future of the company. With 4.9% and 2.3% of the shares outstanding respectively, Capital Research and Management Company and BlackRock, Inc. are the second and third largest shareholders.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Guangdong Investment

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 Guangdong Investment Limited insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. Keep in mind that it's a big company, and the insiders own HK$74m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 19% stake in Guangdong Investment. 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

Our data indicates that Private Companies hold 56%, of the company's shares. 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:

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. For example, we've discovered 1 warning sign for Guangdong Investment that you should be aware of before investing here.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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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