Key Insights

• The considerable ownership by private companies in Hong Fok indicates that they collectively have a greater say in management and business strategy

• 53% of the business is held by the top 4 shareholders

• Insider ownership in Hong Fok is 27%

To get a sense of who is truly in control of Hong Fok Corporation Limited (SGX:H30), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 40% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies were the biggest beneficiaries of last week’s 9.9% gain.

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

See our latest analysis for Hong Fok

What Does The Institutional Ownership Tell Us About Hong Fok?

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.

Less than 5% of Hong Fok is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. So if the company itself can improve over time, we may well see more institutional buyers in the future. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

We note that hedge funds don't have a meaningful investment in Hong Fok. Looking at our data, we can see that the largest shareholder is Hong Fok Land Holding Limited with 22% of shares outstanding. With 14% and 12% of the shares outstanding respectively, Sim Eng Cheong and P.C. Cheong Pte Ltd are the second and third largest shareholders. Sim Eng Cheong, who is the second-largest shareholder, also happens to hold the title of Co-Chief Executive Officer. Furthermore, CEO Pin Chuan Cheong is the owner of 2.8% of the company's shares.

On looking further, we found that 53% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Hong Fok

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own a reasonable proportion of Hong Fok Corporation Limited. Insiders have a S$193m stake in this S$725m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hong Fok. 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 Company Ownership

It seems that Private Companies own 40%, of the Hong Fok 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Hong Fok , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.