Could The Datang International Power Generation Co., Ltd. (HKG:991) Ownership Structure Tell Us Something Useful?

Vernon Smith

Thu, Feb 21, 2019, 5:50 PM

Every investor in Datang International Power Generation Co., Ltd. (HKG:991) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of HK$60b, Datang International Power Generation is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about 991.

Check out our latest analysis for Datang International Power Generation

SEHK:991 Ownership Summary, February 22nd 2019

What Does The Institutional Ownership Tell Us About Datang International Power Generation?

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 Datang International Power Generation does have institutional investors; and they hold 5.8% of the stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Datang International Power Generation, (below). Of course, keep in mind that there are other factors to consider, too.

SEHK:991 Income Statement, February 22nd 2019

Hedge funds don’t have many shares in Datang International Power Generation. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Datang International Power Generation

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our data suggests that insiders own under 1% of Datang International Power Generation Co., Ltd. in their own names. But they may have an indirect interest through a corporate structure that we haven’t picked up on. It’s a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own HK$29k worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public holds a 20% stake in 991. 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

With a stake of 7.0%, private equity firms could influence the 991 board. 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.

Private Company Ownership

We can see that Private Companies own 67%, of the shares on issue. It’s hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

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

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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