Why Regal Real Estate Investment Trust’s (HKG:1881) Investor Composition Impacts Your Returns

Becky Mayes

Updated Thu, Feb 15, 2018, 6:07 PM

In this analysis, my focus will be on developing a perspective on Regal Real Estate Investment Trust’s (SEHK:1881) latest ownership structure, a less discussed, but important factor. 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 effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at 1881’s shareholder registry.

See our latest analysis for Regal Real Estate Investment Trust

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 an institutional ownership of 8.77%, 1881 doesn’t seem too exposed to higher volatility resulting from institutional trading. Apart from low institutional ownership, another indicator of 1881’s low popularity is the fact that the company is only covered by 1 analyst. Stocks with low coverage such as 1881, attracts renowned investor Peter Lynch, who has benefited from the momentum of institutions buying into a stock as it gained popularity.

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. Although individuals in 1881 hold only a minor stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.

General Public Ownership

A big stake of 23.59% in 1881 is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.

Public Company Ownership

Another important group of owners for potential investors in 1881 are other public companies that hold a stake of 67.55% in 1881. These are the companies that are mainly invested due to their strategic interests or incentivized by reaping capital gains on investments. With this size of ownership in 1881, 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:

Institutional ownership in 1881 is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, ownership structure should not be the only determining factor when you’re building an investment thesis for 1881. Instead, you should be evaluating company-specific factors such as Regal Real Estate Investment Trust’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:

1. Future Outlook: What are well-informed industry analysts predicting for 1881’s future growth? Take a look at our free research report of analyst consensus for 1881’s outlook.
2. Past Track Record: Has 1881 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of 1881’s historicals for more clarity.
3. 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.