In This Article:
In this analysis, my focus will be on developing a perspective on Guorui Properties Limited’s (SEHK:2329) latest ownership structure, a less discussed, but important factor. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse 2329’s shareholder registry.
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Institutional Ownership
Institutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. With hardly any institutional ownership, 2329 stock poses limited concern relating to the effect institutional block trades have on its stock price.
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 2329 is individual insiders, sitting with a hefty 83.71% 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). It’s also interesting to learn what 2329 insiders have been doing with their shareholdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public Ownership
The general public holds a substantial 15.57% stake in 2329, making it a highly popular stock among retail investors. 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.
Next Steps:
Institutional ownership level and composition in 2329 is not high nor active enough to significantly impact its investment thesis. However, ownership structure should not be the only focus of your research when constructing an investment thesis around 2329. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Guorui Properties’s share price. I highly recommend you to complete your research by taking a look at the following: