Ajiya Berhad's (KLSE:AJIYA) last week's 13% decline must have disappointed public companies who have a significant stake

Key Insights

• Significant control over Ajiya Berhad by public companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is Chin Hin Group Berhad with a 73% stake
• Insider ownership in Ajiya Berhad is 10%

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To get a sense of who is truly in control of Ajiya Berhad (KLSE:AJIYA), it is important to understand the ownership structure of the business. With 73% stake, public companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, public companies as a group endured the highest losses last week after market cap fell by RM88m.

In the chart below, we zoom in on the different ownership groups of Ajiya Berhad.

See our latest analysis for Ajiya Berhad

What Does The Lack Of Institutional Ownership Tell Us About Ajiya Berhad?

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 are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Ajiya Berhad'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.

We note that hedge funds don't have a meaningful investment in Ajiya Berhad. Our data shows that Chin Hin Group Berhad is the largest shareholder with 73% of shares outstanding. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 5.3% of the shares outstanding, followed by an ownership of 1.2% by the third-largest shareholder.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Ajiya Berhad

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 insiders maintain a significant holding in Ajiya Berhad. It has a market capitalization of just RM579m, and insiders have RM59m worth of shares in their own names. 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, who are usually individual investors, hold a 11% stake in Ajiya Berhad. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 5.7%, of the shares on issue. 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.

Public Company Ownership

It appears to us that public companies own 73% of Ajiya Berhad. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Ajiya Berhad better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.