Azam Jaya Berhad's (KLSE:AZAMJAYA) market cap up RM90m last week, benefiting both private companies who own 40% as well as insiders

Key Insights

• Azam Jaya Berhad's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 50% of the business is held by the top 2 shareholders
• Insider ownership in Azam Jaya Berhad is 38%

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To get a sense of who is truly in control of Azam Jaya Berhad (KLSE:AZAMJAYA), it is important to understand the ownership structure of the business. With 40% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 18% increase in the stock price last week, private companies profited the most, but insiders who own 38% stock also stood to gain from the increase.

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

See our latest analysis for Azam Jaya Berhad

What Does The Lack Of Institutional Ownership Tell Us About Azam Jaya 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 could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Azam Jaya Berhad might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Azam Jaya Berhad is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Lokah Fortune Sdn Bhd with 40% of shares outstanding. The second and third largest shareholders are Vun Lo and Chaw Lo, with an equal amount of shares to their name at 10.0%. Note that the second and third-largest shareholders are also Senior Key Executive and Member of the Board of Directors, respectively, meaning that the company's top shareholders are insiders.

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. 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 Azam Jaya Berhad

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

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders maintain a significant holding in Azam Jaya Berhad. It has a market capitalization of just RM590m, and insiders have RM225m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 22% stake in Azam Jaya Berhad. 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 40%, of the company's shares. 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 Azam Jaya Berhad better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Azam Jaya Berhad (at least 2 which are significant) , and understanding them should be part of your investment process.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.