Chengdu Xingrong Environment Co., Ltd.'s (SZSE:000598) market cap surged CN¥1.6b last week, private companies who have a lot riding on the company were rewarded

Simply Wall St · 10/16 22:40

Key Insights

If you want to know who really controls Chengdu Xingrong Environment Co., Ltd. (SZSE:000598), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private companies with 46% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies collectively scored the highest last week as the company hit CN¥23b market cap following a 7.4% gain in the stock.

Let's take a closer look to see what the different types of shareholders can tell us about Chengdu Xingrong Environment.

View our latest analysis for Chengdu Xingrong Environment

ownership-breakdown
SZSE:000598 Ownership Breakdown October 16th 2024

What Does The Institutional Ownership Tell Us About Chengdu Xingrong Environment?

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 Chengdu Xingrong Environment. 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 Chengdu Xingrong Environment, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
SZSE:000598 Earnings and Revenue Growth October 16th 2024

Hedge funds don't have many shares in Chengdu Xingrong Environment. Our data shows that Chengdu Environment Group is the largest shareholder with 42% of shares outstanding. Three Gorges Capital Holdings Co., Ltd. is the second largest shareholder owning 12% of common stock, and Hong Kong Exchanges & Clearing Limited, Asset Management Arm holds about 3.9% of the company stock.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Chengdu Xingrong Environment

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

Our data suggests that insiders own under 1% of Chengdu Xingrong Environment Co., Ltd. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥115m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Chengdu Xingrong Environment. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With an ownership of 12%, 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

We can see that Private Companies own 46%, 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 Chengdu Xingrong Environment better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Chengdu Xingrong Environment , and understanding them should be part of your investment process.

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.