Every investor in Peijia Medical Limited (HKG:9996) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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$4.8b, Peijia Medical is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions own shares in the company. Let’s delve deeper into each type of owner, to discover more about Peijia Medical.

See our latest analysis for Peijia Medical

ownership-breakdown
SEHK:9996 Ownership Breakdown June 10th 2022

What Does The Institutional Ownership Tell Us About Peijia Medical?

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.

We can see that Peijia Medical does have institutional investors; and they hold a good portion of the company’s stock. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Peijia Medical’s historic earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth
SEHK:9996 Earnings and Revenue Growth June 10th 2022

We note that hedge funds don’t have a meaningful investment in Peijia Medical. Looking at our data, we can see that the largest shareholder is XinYue International Limited with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.5% and 9.2%, of the shares outstanding, respectively. Furthermore, CEO Yi Zhang is the owner of 0.8% of the company’s shares.

We did some more digging and found that 7 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Peijia Medical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 see that insiders own shares in Peijia Medical Limited. In their own names, insiders own HK$394m worth of stock in the HK$4.8b company. 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

With a 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Peijia Medical. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With an ownership of 22%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

It seems that Private Companies own 18%, of the Peijia Medical stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the 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. Be aware that Peijia Medical is showing 2 warning signs in our investment analysis , you should know about…

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.

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.



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