Could The BYD Company Limited (HKG:1211) Ownership Structure Tell Us Something Useful?

Simply Wall St.

Tue, Dec 11, 2018, 5:29 PM

If you want to know who really controls BYD Company Limited (HKG:1211), 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.

BYD has a market capitalization of HK$163b, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. 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 1211.

View our latest analysis for BYD

SEHK:1211 Ownership Summary December 12th 18

What Does The Institutional Ownership Tell Us About BYD?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that BYD does have institutional investors; and they hold 15% of the stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at BYD’s earnings history, below. Of course, the future is what really matters.

SEHK:1211 Income Statement Export December 12th 18

Hedge funds don’t have many shares in BYD. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of BYD

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 information suggests that insiders maintain a significant holding in BYD Company Limited. Insiders own HK$52b worth of shares in the HK$163b company. That’s quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 37% ownership, the general public have some degree of sway over 1211. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 6.0% stake in 1211. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Public Company Ownership

We can see that public companies hold 10%, of the 1211 shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand BYD better, we need to consider many other factors.

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.

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.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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