Who Are The Top Investors In Hong Lai Huat Group Limited (SGX:H27)?

Wade Goff

Updated Wed, May 9, 2018, 7:26 PM

I am going to take a deep dive into Hong Lai Huat Group Limited’s (SGX:H27) most recent ownership structure, not a frequent subject of discussion among individual investors. Ownership structure of a company has been found to affect share performance over time. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct H27’s shareholder registry.

View our latest analysis for Hong Lai Huat Group

Institutional Ownership

Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. H27 has institutions holding a stake of just 3.12%, which should not be much of a concern in terms of excessive price volatility. Another important owner type is hedge funds, who tend to be investors with short-term horizons. With 6.42% ownership in H27, they seem to have a significant enough holding to cause a spike in volatility in the short run. However, I would also examine the rest of its ownership structure in more detail to determine how the company’s major shareholders can affect its investment case.

Insider Ownership

Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. H27 insiders hold a significant stake of 35.46% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.

General Public Ownership

The general public holds a substantial 53.65% stake in H27, 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 H27 are private companies that hold a stake of 1.34% in H27. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence H27’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

Although H27 has a low level of overall institutional ownership, active hedge funds still have a significant stake in the company. This level of ownership is a non-fundamental factor that can impact stock prices in the short-term. It is important that H27 offers enough margin of safety in order to avoid a significant portfolio impact resulting from a sustained sell-off and drop in share value. However, ownership structure should not be the only determining factor when you’re building an investment thesis for H27. Rather, you should be looking at fundamental drivers such as Hong Lai Huat 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 H27’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.
Past Track Record: Has H27 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 H27’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 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.