Individual investors own 33% of Hong Leong Finance Limited (SGX:S41) shares but private companies control 57% of the company

Simply Wall St

Tue, Nov 1, 2022, 10:33 PM 4 min read

To get a sense of who is truly in control of Hong Leong Finance Limited (SGX:S41), it is important to understand the ownership structure of the business. With 57% stake, private companies possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And individual investors on the other hand have a 33% ownership in the company.

Let's take a closer look to see what the different types of shareholders can tell us about Hong Leong Finance.

Check out our latest analysis for Hong Leong Finance

ownership-breakdown — SGX:S41 Ownership Breakdown November 2nd 2022

What Does The Institutional Ownership Tell Us About Hong Leong Finance?

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 Hong Leong Finance does have institutional investors; and they hold a good portion of the company's stock. 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 Hong Leong Finance's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth — SGX:S41 Earnings and Revenue Growth November 2nd 2022

Hedge funds don't have many shares in Hong Leong Finance. Hong Leong Investment Holdings Pte. Ltd. is currently the company's largest shareholder with 55% of shares outstanding. This implies that they have majority interest control of the future of the company. Hong Leong Foundation, Endowment Arm is the second largest shareholder owning 3.1% of common stock, and City Developments Limited holds about 2.0% of the company stock. In addition, we found that Leng Beng Kwek, the CEO has 1.5% of the shares allocated to their name.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Hong Leong Finance

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Shareholders would probably be interested to learn that insiders own shares in Hong Leong Finance Limited. As individuals, the insiders collectively own S$41m worth of the S$1.1b company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 33% stake in the company, and hence can't easily be ignored. 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 Company Ownership

We can see that Private Companies own 57%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Hong Leong Finance (at least 2 which are concerning) , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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