Could The Raffles Education Corporation Limited (SGX:NR7) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
November 24, 2020
SGX:NR7

The big shareholder groups in Raffles Education Corporation Limited (SGX:NR7) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

With a market capitalization of S$178m, Raffles Education is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions don't own many shares in the company. Let's delve deeper into each type of owner, to discover more about Raffles Education.

See our latest analysis for Raffles Education

ownership-breakdown
SGX:NR7 Ownership Breakdown November 24th 2020

What Does The Institutional Ownership Tell Us About Raffles Education?

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.

Less than 5% of Raffles Education is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

earnings-and-revenue-growth
SGX:NR7 Earnings and Revenue Growth November 24th 2020

Raffles Education is not owned by hedge funds. The company's CEO Hua Seng Chew is the largest shareholder with 26% of shares outstanding. Hong Leong Oei is the second largest shareholder owning 10% of common stock, and Gim Chung holds about 7.4% of the company stock.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Raffles Education

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders own more than half of Raffles Education Corporation Limited. This gives them effective control of the company. So they have a S$93m stake in this S$178m business. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

With a 37% ownership, the general public have some degree of sway over Raffles Education. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

It seems that Private Companies own 9.3%, of the Raffles Education 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. Case in point: We've spotted 2 warning signs for Raffles Education you should be aware of, and 1 of them makes us a bit uncomfortable.

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. 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.
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