Southern Alliance Mining's significant insider ownership suggests inherent interests in company's expansion
Kok Sam Pek owns 64% of the company
A look at the shareholders of Southern Alliance Mining Ltd. (Catalist:QNS) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual insiders with 77% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
A quick look at our data suggests that insiders have been buying shares in the company recently. This might indicate that they expect share prices to rise in the near future.
In the chart below, we zoom in on the different ownership groups of Southern Alliance Mining.
What Does The Lack Of Institutional Ownership Tell Us About Southern Alliance Mining?
We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.
There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Southern Alliance Mining's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.
We note that hedge funds don't have a meaningful investment in Southern Alliance Mining. The company's CEO Kok Sam Pek is the largest shareholder with 64% of shares outstanding. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. Meanwhile, the second and third largest shareholders, hold 6.9% and 4.6%, of the shares outstanding, respectively. Interestingly, the third-largest shareholder, Teck Tee Teh is also a Chairman of the Board, again, indicating strong insider ownership amongst the company's top shareholders.
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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Southern Alliance Mining
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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 insiders own more than half of Southern Alliance Mining Ltd.. This gives them effective control of the company. Given it has a market cap of S$323m, that means they have S$248m worth of shares. 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
The general public, who are usually individual investors, hold a 22% stake in Southern Alliance Mining. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 1 warning sign for Southern Alliance Mining that you should be aware of.
Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.