Do Directors Own Jiashili Group Limited (HKG:1285) Shares?

Lester Strauss

Sun, Jan 13, 2019, 9:38 PM

Every investor in Jiashili Group Limited (HKG:1285) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.’

With a market capitalization of HK$735m, Jiashili Group is a small cap stock, so it might not be well known by many institutional investors. Taking a look at the our data on the ownership groups (below), it’s seems that institutions don’t own shares in the company. We can zoom in on the different ownership groups, to learn more about 1285.

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SEHK:1285 Ownership Summary January 14th 19

What Does The Lack Of Institutional Ownership Tell Us About Jiashili Group?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.

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. 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. Jiashili Group’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:1285 Income Statement Export January 14th 19

We note that hedge funds don’t have a meaningful investment in Jiashili Group. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Jiashili Group

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. 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.

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 Jiashili Group Limited. This gives them effective control of the company. Given it has a market cap of HK$735m, that means they have HK$445m worth of shares. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, with a 25% stake in the company, will not easily be ignored. 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.

Private Equity Ownership

Private equity firms hold a 14% stake in 1285. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

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 like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

If you would prefer check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, backed by strong financial data.

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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