What Type Of Shareholder Owns China Traditional Chinese Medicine Holdings Co. Limited’s (HKG:570)?

Will Harmon

Mon, Dec 24, 2018, 5:24 PM

The big shareholder groups in China Traditional Chinese Medicine Holdings Co. Limited (HKG:570) 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.’

With a market capitalization of HK$24b, China Traditional Chinese Medicine Holdings is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at the our data on the ownership groups (below), it’s seems that institutions are noticeable on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about 570.

Check out our latest analysis for China Traditional Chinese Medicine Holdings

SEHK:570 Ownership Summary December 25th 18

What Does The Institutional Ownership Tell Us About China Traditional Chinese Medicine Holdings?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors own 24% of China Traditional Chinese Medicine Holdings. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at China Traditional Chinese Medicine Holdings’s earnings history, below. Of course, the future is what really matters.

SEHK:570 Income Statement Export December 25th 18

We note that hedge funds don’t have a meaningful investment in China Traditional Chinese Medicine Holdings. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of China Traditional Chinese Medicine 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems insiders own a significant proportion of China Traditional Chinese Medicine Holdings Co. Limited. It is very interesting to see that insiders have a meaningful HK$3.0b stake in this HK$24b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 31% ownership, the general public have some degree of sway over 570. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 32%, 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.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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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