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Could The Jinhui Holdings Company Limited (HKG:137) Ownership Structure Tell Us Something Useful?

Simply Wall St

If you want to know who really controls Jinhui Holdings Company Limited (HKG:137), then you'll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes 'a business with enduring competitive advantages that is run by able and owner-oriented people'. So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

With a market capitalization of HK$461m, Jinhui Holdings is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutional investors have not yet purchased shares. Let's take a closer look to see what the different types of shareholder can tell us about 137.

See our latest analysis for Jinhui Holdings

SEHK:137 Ownership Summary, August 17th 2019

What Does The Lack Of Institutional Ownership Tell Us About Jinhui Holdings?

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 fund under management, so the institition does not bother to look closely at the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Jinhui Holdings'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.

SEHK:137 Income Statement, August 17th 2019

Hedge funds don't have many shares in Jinhui Holdings. 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 Jinhui Holdings

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.

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 Jinhui Holdings Company Limited. This gives them effective control of the company. That means they own HK$344m worth of shares in the HK$461m company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, with a 20% 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.

Private Company Ownership

Our data indicates that Private Companies hold 5.6%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.

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.

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. Thank you for reading.