Guan Chong Berhad's (KLSE:GCB) market cap up RM302m last week, benefiting both private companies who own 52% as well as insiders

Key Insights

• Significant control over Guan Chong Berhad by private companies implies that the general public has more power to influence management and governance-related decisions
• A total of 2 investors have a majority stake in the company with 57% ownership
• Insider ownership in Guan Chong Berhad is 20%

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To get a sense of who is truly in control of Guan Chong Berhad (KLSE:GCB), 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 52% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Private companies gained the most after market cap touched RM2.8b last week, while insiders who own 20% also benefitted.

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

See our latest analysis for Guan Chong Berhad

What Does The Institutional Ownership Tell Us About Guan Chong Berhad?

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.

Guan Chong Berhad 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 Guan Chong Berhad's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Guan Chong Berhad. Guan Chong Resources Sdn. Bhd is currently the company's largest shareholder with 50% of shares outstanding. For context, the second largest shareholder holds about 6.6% of the shares outstanding, followed by an ownership of 4.9% by the third-largest shareholder. Interestingly, the bottom two of the top three shareholders also hold the title of Chief Financial Officer and Member of the Board of Directors, respectively, suggesting that these insiders have a personal stake in the company.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 57% stake.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Guan Chong 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.

It seems insiders own a significant proportion of Guan Chong Berhad. It has a market capitalization of just RM2.8b, and insiders have RM560m 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-- including retail investors -- own 14% stake in the company, and hence can't easily be ignored. 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 52%, of the Guan Chong Berhad 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. Take risks for example - Guan Chong Berhad has 2 warning signs we think you should be aware of.

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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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.