Today, I will be analyzing China Mining International Limited’s (SGX:BHD) 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 BHD’s shareholder registry. All data provided is as of the most recent financial year end.
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Institutional Ownership
Institutions account for 37.54% of BHD’s outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. Although BHD has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. For shareholders in BHD, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t necessarily lead to high short-term volatility, we should dig deeper into BHD’s ownership structure to find how the remaining owner types can affect its investment profile.
Insider Ownership
I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. A major group of owners of BHD is individual insiders, sitting with a hefty 55.52% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public Ownership
The general public holds 6.94% stake in BHD, thus, representing an important class of owners. 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 if it aligns with other large shareholders.