Kuala Lumpur Kepong Berhad's (KLSE:KLK) market cap dropped RM1.1b last week; individual investors who hold 48% were hit as were institutions

Key Insights

• Significant control over Kuala Lumpur Kepong Berhad by public 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 64% ownership
• Institutions own 33% of Kuala Lumpur Kepong Berhad

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To get a sense of who is truly in control of Kuala Lumpur Kepong Berhad (KLSE:KLK), it is important to understand the ownership structure of the business. We can see that public companies own the lion's share in the company with 48% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions who own 33% came under pressure after market cap dropped to RM22b last week,public companies took the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Kuala Lumpur Kepong Berhad.

View our latest analysis for Kuala Lumpur Kepong Berhad

What Does The Institutional Ownership Tell Us About Kuala Lumpur Kepong Berhad?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Kuala Lumpur Kepong Berhad already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Kuala Lumpur Kepong 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 Kuala Lumpur Kepong Berhad. Batu Kawan Berhad is currently the company's largest shareholder with 48% of shares outstanding. Employees Provident Fund of Malaysia is the second largest shareholder owning 16% of common stock, and Permodalan Nasional Berhad holds about 4.0% of the company stock.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 Kuala Lumpur Kepong Berhad

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Kuala Lumpur Kepong Berhad insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own RM114m worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 15% stake in Kuala Lumpur Kepong 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.

Public Company Ownership

We can see that public companies hold 48% of the Kuala Lumpur Kepong Berhad shares on issue. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Kuala Lumpur Kepong Berhad you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts .

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.