What Kind Of Shareholders Own AECI Ltd (JSE:AFE)?

By
Simply Wall St
Published
February 16, 2020

A look at the shareholders of AECI Ltd (JSE:AFE) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

AECI is a smaller company with a market capitalization of R12b, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about AECI.

Check out our latest analysis for AECI

JSE:AFE Ownership Summary, February 16th 2020

What Does The Institutional Ownership Tell Us About AECI?

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.

AECI already has institutions on the share registry. Indeed, they own 72% of 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. 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 AECI, (below). Of course, keep in mind that there are other factors to consider, too.

JSE:AFE Income Statement, February 16th 2020

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 AECI. The company's largest shareholder is Public Investment Corporation Limited, with ownership of 10%, The second and third largest shareholders are PSG Asset Management (Pty) Ltd. and Allan Gray Limited, holding 9.8% and 9.1%, respectively.

On further inspection, we found that 51% of the share register is owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of AECI

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 data suggests that insiders own under 1% of AECI Ltd in their own names. It seems the board members have no more than R26m worth of shares in the R12b company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public, with a 22% stake in the company, will not easily be ignored. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that AECI is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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