Singapore Telecommunications Limited’s (SGX:Z74) stock price dropped 4.9% last week; private equity firms would not be happy

Key Insights

• The considerable ownership by private equity firms in Singapore Telecommunications indicates that they collectively have a greater say in management and business strategy

• Temasek Holdings (Private) Limited owns 51% of the company

• 19% of Singapore Telecommunications is held by Institutions

A look at the shareholders of Singapore Telecommunications Limited (SGX:Z74) can tell us which group is most powerful. With 51% stake, private equity firms possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, private equity firms endured the biggest losses as the stock fell by 4.9%.

Let’s delve deeper into each type of owner of Singapore Telecommunications, beginning with the chart below.

View our latest analysis for Singapore Telecommunications

What Does The Institutional Ownership Tell Us About Singapore Telecommunications?

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.

Singapore Telecommunications already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at Singapore Telecommunications’ earnings history below. Of course, the future is what really matters.

Hedge funds don’t have many shares in Singapore Telecommunications. Temasek Holdings (Private) Limited is currently the largest shareholder, with 51% 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 4.7% of the shares outstanding, followed by an ownership of 3.4% by the third-largest shareholder.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Singapore Telecommunications

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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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 Singapore Telecommunications Limited. As it is a large company, we’d only expect insiders to own a small percentage of it. But it’s worth noting that they own S$6.9m worth of shares. 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– including retail investors — own 29% stake in the company, and hence can’t easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 51%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Singapore Telecommunications (at least 1 which doesn’t sit too well with us) , 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.

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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.