Key Insights
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Sembcorp Industries’ significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
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The top 2 shareholders own 52% of the company
A look at the shareholders of Sembcorp Industries Ltd (SGX:U96) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private equity firms with 49% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Clearly, private equity firms benefitted the most after the company’s market cap rose by S$518m last week.
In the chart below, we zoom in on the different ownership groups of Sembcorp Industries.
See our latest analysis for Sembcorp Industries
What Does The Institutional Ownership Tell Us About Sembcorp Industries?
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.
We can see that Sembcorp Industries does have institutional investors; and they hold a good portion of the company’s stock. 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. 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 Sembcorp Industries’ 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 Sembcorp Industries. The company’s largest shareholder is Temasek Holdings (Private) Limited, with ownership of 49%. In comparison, the second and third largest shareholders hold about 2.6% and 1.7% of the stock.
A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 52% stake.
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. 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 Sembcorp Industries
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.
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 data suggests that insiders own under 1% of Sembcorp Industries Ltd in their own names. Keep in mind that it’s a big company, and the insiders own S$92m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 37% stake in Sembcorp Industries. 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 Equity Ownership
Private equity firms hold a 49% stake in Sembcorp Industries. This suggests they can be influential in key policy decisions. 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.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 2 warning signs for Sembcorp Industries (1 shouldn’t be ignored!) that you should be aware of before investing here.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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