Key Insights

• Significant control over Sinotrans by private companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is China Merchants Group Limited with a 59% stake
• Institutional ownership in Sinotrans is 18%

If you want to know who really controls Sinotrans Limited (HKG:598), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 59% to be precise, is private companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private companies collectively scored the highest last week as the company hit HK$35b market cap following a 4.6% gain in the stock.

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

What Does The Institutional Ownership Tell Us About Sinotrans?

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 Sinotrans. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Sinotrans, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Sinotrans. Our data shows that China Merchants Group Limited is the largest shareholder with 59% of shares outstanding. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 4.2% of the shares outstanding, followed by an ownership of 2.4% by the third-largest shareholder.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Sinotrans

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 most recent data indicates that insiders own less than 1% of Sinotrans Limited. 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$133m 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

The general public, who are usually individual investors, hold a 22% stake in Sinotrans. 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

We can see that Private Companies own 59%, of the shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Sinotrans better, we need to consider many other factors. For instance, we've identified 1 warning sign for Sinotrans that you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com