Institutional owners may take dramatic actions as Kingdee International Software Group Company Limited’s (HKG:268) recent 5.8% drop adds to one-year losses

Key Insights

To get a sense of who is truly in control of Kingdee International Software Group Company Limited (HKG:268), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 55% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company’s share price fell by 5.8% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 31% for shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Kingdee International Software Group, which might have negative implications on individual investors.

Let’s take a closer look to see what the different types of shareholders can tell us about Kingdee International Software Group.

View our latest analysis for Kingdee International Software Group

SEHK:268 Ownership Breakdown January 16th 2023

What Does Institutional Ownership Tell Us About Kingdee International Software Group?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Kingdee International Software Group. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Kingdee International Software Group, (below). Of course, keep in mind that there are other factors to consider, too.

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SEHK:268 Earnings and Revenue Growth January 16th 2023

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Kingdee International Software Group is not owned by hedge funds. The company’s CEO Shao Chun Xu is the largest shareholder with 20% of outstanding shares. In comparison, the second and third largest shareholders hold about 6.3% and 5.7% of the stock.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

While studying institutional ownership for a company can add value to your research, it is also a good practice for 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 Kingdee International Software Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that insiders maintain a significant holding in Kingdee International Software Group Company Limited. Insiders own HK$12b worth of shares in the HK$58b company. That’s quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 20% stake in Kingdee International Software Group. 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.

Public Company Ownership

It appears to us that public companies own 5.0% of Kingdee International Software Group. It’s hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it’s worth watching this space for changes in ownership.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

If you would prefer to 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.

Valuation is complex, but we’re helping make it simple.

Find out whether Kingdee International Software Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.

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