Northeast Group Berhad's (KLSE:NE) last week's 10% decline must have disappointed private companies who have a significant stake

Key Insights

• The considerable ownership by private companies in Northeast Group Berhad indicates that they collectively have a greater say in management and business strategy
• 54% of the company is held by a single shareholder (Mountain Range Sdn Bhd)
• Insider ownership in Northeast Group Berhad is 24%

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Every investor in Northeast Group Berhad (KLSE:NE) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 54% to be precise, is private companies. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While insiders, who own 24% shares weren’t spared from last week’s RM56m market cap drop, private companies as a group suffered the maximum losses

Let's delve deeper into each type of owner of Northeast Group Berhad, beginning with the chart below.

See our latest analysis for Northeast Group Berhad

What Does The Institutional Ownership Tell Us About Northeast Group Berhad?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Northeast Group 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Northeast Group Berhad, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Northeast Group Berhad. Our data shows that Mountain Range Sdn Bhd is the largest shareholder with 54% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Chay Ng is the second largest shareholder owning 5.6% of common stock, and Norges Bank Investment Management holds about 4.5% of the company stock. Chay Ng, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Northeast Group 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.

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 Northeast Group Berhad. It has a market capitalization of just RM492m, and insiders have RM118m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Northeast Group 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 54%, 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.