Key Insights

• Significant control over Central China Securities by retail investors implies that the general public has more power to influence management and governance-related decisions

• The top 25 shareholders own 43% of the company

• 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 Central China Securities Co., Ltd. (HKG:1375) can tell us which group is most powerful.  With 57% stake, retail investors possess the maximum shares in the company.   In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, retail investors endured the biggest losses as the stock fell by 10%.    

In the chart below, we zoom in on the different ownership groups of Central China Securities.

View our latest analysis for Central China Securities

SEHK:1375 Ownership Breakdown January 23rd 2024

What Does The Institutional Ownership Tell Us About Central China Securities?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Central China Securities does have institutional investors; and they hold a good portion of the company's stock.  This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes.  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 Central China Securities' historic earnings and revenue below, but keep in mind there's always more to the story.

SEHK:1375 Earnings and Revenue Growth January 23rd 2024

Central China Securities is not owned by hedge funds.      Henan Investment Group Co.,Ltd is currently the company's largest shareholder with 21% of shares outstanding.        For context, the second largest shareholder holds about 3.8% of the shares outstanding, followed by an ownership of 3.4% by the third-largest shareholder.  

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance.   There is some analyst coverage of the stock, but it could still become more well known, with time.  

Insider Ownership Of Central China Securities

The definition of an insider can differ slightly between different countries, but members of the board of directors always count.  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.

Shareholders would probably be interested to learn that insiders own shares in Central China Securities Co., Ltd..   It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around HK$160m worth of shares (at current prices).  Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.  

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 57% of Central China Securities shares.   This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.  

Private Equity Ownership

With a stake of 21%, private equity firms could influence the Central China Securities board.   Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.  

Private Company Ownership

Our data indicates that Private Companies hold 11%, of the company's shares.   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.    To that end, you should be aware of the   1 warning sign we've spotted with Central China Securities .  

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.