Key Insights

• Hong Leong Finance's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The largest shareholder of the company is Hong Leong Investment Holdings Pte. Ltd. with a 55% stake
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Hong Leong Finance Limited (SGX:S41) can tell us which group is most powerful. We can see that private companies own the lion's share in the company with 57% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies as a group endured the highest losses last week after market cap fell by S$76m.

In the chart below, we zoom in on the different ownership groups of Hong Leong Finance.

View our latest analysis for Hong Leong Finance

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.

Hong Leong Finance already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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.

We note that hedge funds don't have a meaningful investment in Hong Leong Finance. Hong Leong Investment Holdings Pte. Ltd. is currently the company's largest shareholder with 55% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Meanwhile, the second and third largest shareholders, hold 3.1% and 2.0%, of the shares outstanding, respectively. Furthermore, CEO Leng Beng Kwek is the owner of 1.5% of the company's shares.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can report that insiders do own shares in Hong Leong Finance Limited. It has a market capitalization of just S$1.1b, and insiders have S$42m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

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

It seems that Private Companies own 57%, of the Hong Leong Finance stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Hong Leong Finance you should be aware of, and 2 of them make us uncomfortable.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.

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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.