Institutional owners may consider drastic measures as S P Setia Berhad's (KLSE:SPSETIA) recent RM350m drop adds to long-term losses

Key Insights

• Given the large stake in the stock by institutions, S P Setia Berhad's stock price might be vulnerable to their trading decisions
• The top 2 shareholders own 59% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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If you want to know who really controls S P Setia Berhad (KLSE:SPSETIA), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 81% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 5.9% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 29% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in S P Setia Berhad's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of S P Setia Berhad.

See our latest analysis for S P Setia Berhad

What Does The Institutional Ownership Tell Us About S P Setia 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.

S P Setia Berhad already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 S P Setia Berhad's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in S P Setia Berhad. The company's largest shareholder is Permodalan Nasional Berhad, with ownership of 49%. For context, the second largest shareholder holds about 9.4% of the shares outstanding, followed by an ownership of 8.1% by the third-largest shareholder.

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.

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

Insider Ownership Of S P Setia Berhad

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that S P Setia Berhad insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own RM705k worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over S P Setia 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand S P Setia Berhad better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for S P Setia Berhad you should know about.

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.