- Significant control over China Energy Engineering by private companies implies that this group likely has considerable sway over management and governance-related decisions
- The top 2 shareholders own 51% of the company
- own 16% of China Energy Engineering
To get a sense of who is truly in control of China Energy Engineering Corporation Limited (HKG:3996), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 52% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Individual investors, on the other hand, account for 32% of the company’s stockholders.
Let’s delve deeper into each type of owner of China Energy Engineering, beginning with the chart below.
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What Does The Institutional Ownership Tell Us About China Energy Engineering?
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 have a fair amount of stake in China Energy Engineering. 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 China Energy Engineering’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 China Energy Engineering. The company’s largest shareholder is China Energy Engineering Group Co., Ltd., with ownership of 46%. With 4.9% and 3.5% of the shares outstanding respectively, China Reform Holdings Corporation Ltd. and The Silk Road Fund Co Ltd. are the second and third largest shareholders.
To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.
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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of China Energy Engineering
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.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our data suggests that insiders own under 1% of China Energy Engineering Corporation Limited in their own names. However, it’s possible that insiders might have an indirect interest through a more complex structure. Keep in mind that it’s a big company, and the insiders own HK$194m worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over China Energy Engineering. 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
Our data indicates that Private Companies hold 52%, of the company’s shares. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We’ve identified 1 warning sign with China Energy Engineering , and understanding them should be part of your investment process.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.