What You Must Know About YPB Group Limited’s (ASX:YPB) Major Investors

Pam Parks

Updated Thu, May 17, 2018, 10:03 PM

In this article, I’m going to take a look at YPB Group Limited’s (ASX:YPB) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-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 YPB’s shareholder registry.

See our latest analysis for YPB Group

Institutional Ownership

YPB’s 10.90% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. In the case of YPB, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into YPB’s ownership structure and find out how other key ownership classes can affect its investment profile.

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 YPB is individual insiders, sitting with a hefty 35.69% 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). Another aspect of insider ownership is to learn about their recent transactions. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.

General Public Ownership

The general public holds a substantial 35.07% stake in YPB, making it a highly popular stock among retail investors. 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.

Private Company Ownership

Another important group of owners for potential investors in YPB are private companies that hold a stake of 18.33% in YPB. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. An ownership of this size indicates a strong financial backing and has the potential to influence YPB’s business strategy. Thus, investors should dig deeper into YPB’s business relations with these companies and how it can affect shareholder returns in the long-term.

Next Steps:

YPB’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only determining factor when you’re building an investment thesis for YPB. Rather, you should be examining fundamental factors such as YPB Group’s past track record and financial health. I urge you to complete your research by taking a look at the following:

Financial Health: Is YPB’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Valuation: What is YPB worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether YPB is currently mispriced by the market.
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.