Who Really Owns CITIC Telecom International Holdings Limited (HKG:1883)?

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Laura Kearns

Updated Wed, Aug 15, 2018, 7:48 PM

In this analysis, my focus will be on developing a perspective on CITIC Telecom International Holdings Limited’s (HKG:1883) latest ownership structure, a less discussed, but important factor. Ownership structure of a company has been found to affect share performance over time. 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 1883’s shareholder registry.

View our latest analysis for CITIC Telecom International Holdings

SEHK:1883 Ownership Summary August 16th 18

Institutional Ownership

Institutions account for 13.59% of 1883’s outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of 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 1883, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into 1883’s ownership structure and find out how other key ownership classes can affect its investment profile.

Insider Ownership

I find insiders are an 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. 1883 insiders hold a minor stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. I will also like to check what insiders have been doing recently with their holdings. 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.

SEHK:1883 Insider Trading August 16th 18

General Public Ownership

A substantial ownership of 26.62% in 1883 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.

Private Company Ownership

Potential investors in 1883 should also look at another important group of investors: private companies, with a stake of 59.69%, who are primarily invested because of strategic and capital gain interests. With this size of ownership in 1883, 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:

The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around 1883. Rather, you should be looking at fundamental drivers such as CITIC Telecom International Holdings’s past track record and financial health. I urge you to complete your research by taking a look at the following:

Future Outlook: What are well-informed industry analysts predicting for 1883’s future growth? Take a look at our free research report of analyst consensus for 1883’s outlook.
Past Track Record: Has 1883 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 1883’s historicals for more clarity.
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 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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