Nam Cheong Limited's (SGX:1MZ) stock price dropped 10% last week; individual investors would not be happy

Key Insights

• Significant control over Nam Cheong by individual investors implies that the general public has more power to influence management and governance-related decisions
• A total of 7 investors have a majority stake in the company with 53% ownership
• Insiders own 38% of Nam Cheong

To get a sense of who is truly in control of Nam Cheong Limited (SGX:1MZ), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 44% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders, who own 38% shares weren’t spared from last week’s S$18m market cap drop, individual investors as a group suffered the maximum losses

Let's delve deeper into each type of owner of Nam Cheong, beginning with the chart below.

View our latest analysis for Nam Cheong

What Does The Institutional Ownership Tell Us About Nam Cheong?

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.

As you can see, institutional investors have a fair amount of stake in Nam Cheong. 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 Nam Cheong, (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 Nam Cheong. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Nam Cheong's case, its Top Key Executive, Su Tiong, is the largest shareholder, holding 28% of shares outstanding. For context, the second largest shareholder holds about 5.8% of the shares outstanding, followed by an ownership of 5.2% by the third-largest shareholder. Furthermore, CEO Seng Keat Leong is the owner of 3.5% of the company's shares.

We did some more digging and found that 7 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Nam Cheong

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own a reasonable proportion of Nam Cheong Limited. Insiders own S$57m worth of shares in the S$151m company. 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 44% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Nam Cheong. 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 4.7%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Nam Cheong better, we need to consider many other factors. For example, we've discovered 3 warning signs for Nam Cheong (1 is a bit unpleasant!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.