Do Directors Own China Grand Pharmaceutical and Healthcare Holdings Limited (HKG:512) Shares?

Simply Wall St.

Fri, Nov 30, 2018, 7:53 PM

The big shareholder groups in China Grand Pharmaceutical and Healthcare Holdings Limited (HKG:512) have power over the company. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of 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.’

China Grand Pharmaceutical and Healthcare Holdings isn’t enormous, but it’s not particularly small either. It has a market capitalization of HK$12b, which means it would generally expect to see some institutions on the share registry. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about 512.

See our latest analysis for China Grand Pharmaceutical and Healthcare Holdings

SEHK:512 Ownership Summary December 1st 18

What Does The Institutional Ownership Tell Us About China Grand Pharmaceutical and Healthcare Holdings?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors own 8.5% of China Grand Pharmaceutical and Healthcare Holdings. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see China Grand Pharmaceutical and Healthcare Holdings’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SEHK:512 Income Statement Export December 1st 18

China Grand Pharmaceutical and Healthcare Holdings is not owned by hedge funds. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of China Grand Pharmaceutical and Healthcare Holdings

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that insiders own more than half of China Grand Pharmaceutical and Healthcare Holdings Limited. This gives them effective control of the company. Given it has a market cap of HK$12b, that means insiders have a whopping HK$6.6b worth of shares in their own names. It is good to see this level of investment. You can check here to see if those insiders have been selling any of their shares.

General Public Ownership

With a 15% ownership, the general public have some degree of sway over 512. 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

With a stake of 5.8%, private equity firms could influence the 512 board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

We can see that Private Companies own 17%, 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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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