Why Evergreen Products Group Limited’s (HKG:1962) Ownership Structure Is Important
Today, I will be analyzing Evergreen Products Group Limited’s (SEHK:1962) recent ownership structure, an important but not-so-popular subject among individual investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct 1962’s shareholder registry.
View our latest analysis for Evergreen Products Group
Insider Ownership
Insiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. 1962 insiders hold a not-so-significant 1.89% stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.
General Public Ownership
A substantial ownership of 25.62% in 1962 is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Private Equity Ownership
Private equity firms hold a 17.71% stake in 1962. With a stake of this size, they can be influential in key policy decisions. This is a positive sign for potential investors as these firms play an important role in aligning company policy with shareholder returns.
Private Company Ownership
Another important group of owners for potential investors in 1962 are private companies that hold a stake of 54.78% in 1962. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. With this size of ownership in 1962, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
Next Steps:
A relatively low shareholding by company insider could indicate potential misalignment of interest. However, on the other hand, this could also be a positive as the level of influence over the board of directors can also be limited. However, ownership structure should not be the only determining factor when you’re building an investment thesis for 1962. Rather, you should be examining fundamental factors such as Evergreen Products Group’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
1. Financial Health: Is 1962’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
