Here Are 3 Companies With Management Teams That Have Huge Skin In The Game

Is it a good thing for investors if a company has a management team that also owns a significant (or majority) stake in said company? There are pros and cons with such a situation.

One big reason investors may suffer is that management could easily benefit at the expense of minority shareholders, since the managers are also the ones with the controlling votes.

On the positive side, having managers with large ownership stakes in a company helps align their interests with minority shareholders, since management’s wealth is significantly exposed to the success and failure of the company.

Personally, I do pay attention to companies with owner-operators, under the context that the owner-operator is someone who treats minority shareholders as partners.

There are many companies in Singapore’s stock market that have owner-operators. Let’s take a look at three of them.

The supermarket champion

If you’ve been living in Singapore for a while, chances are you’d have seen Sheng Siong Group Ltd (SGX: OV8) at work. The company is one of the largest supermarket chains in Singapore with a network of 42 stores that are primarily located in the Garden City’s heartlands. Sheng Siong has a long history of being in business, having been established over 30 years ago in 1985.

According to Sheng Siong’s 2015 annual report, the Lim brothers – Lim Hock Chee, Lim Hock Eng, and Lim Hock Leng – collectively control 52.63% of the company’s shares as of 18 March 2016. The Lim brothers are key members of Sheng Siong’s management team: Lim Hock Chee is the chief executive officer, Lim Hock Eng is the executive chairman, and Lim Hock Leng is the managing director.

Sheng Siong was listed in 2011 and has delivered solid gains. Since the close of its debut, the company’s stock price has climbed by 176%. Its revenue and profit have also increased by 38% and 130%, respectively, from 2011 to 2016.

The luxury watch retailer

Founded in 1979, Hour Glass Ltd (SGX: AGS) is a retailer of luxury time pieces. Today, Hour Glass has over 40 boutiques in six countries in the Asia Pacific region (Singapore, Malaysia, Thailand, Hong Kong, Japan, and Australia). Over 50 of the world’s finest watch brands – such as Hublot, IWC, Patek Philippe, Richard Mille, and Rolex – are carried in the company’s boutiques.

Hour Glass’s founders, Dr Henry Tay Yun Chwan and Dato’ Dr Jannie Chan Siew Lee, collectively control 52.16% of the company’s shares as of 8 June 2016. Tay is currently Hour Glass’s executive chairman while Chan had stepped down from her leadership role in 2016. Michael Tay, who’s the son of Tay and Chan, is also the managing director of Hour Glass.

Over the past 10 years, Hour Glass has seen its stock price rise 219%. From its FY2006 (fiscal year ended 31 March 2006) to FY2016, the luxury watch retailer has also seen its revenue double and profit more than quadruple.

The gloves maker

Since its listing over 10 years ago in November 2006, Riverstone Holdings Limited (SGX: AP4) has been a long-term market-beater – its stock price has increased by 446%.

A producer of cleanroom and medical rubber gloves, RIverstone is 50.75%-owned (as of 10 March 2016) by its founder, Wong Teek Son. Wong is currently Riverstone’s chief executive officer and executive chairman.

The company’s business performance has been good. From 2007 to 2016, Riverstone’s revenue has jumped by 436%. Its profit, meanwhile, has increased by a nearly identical amount of 435%.

A Foolish conclusion

There are pros and cons for investing in a company with an owner-operator. It is important that individual investors assess each company on its own. The three companies with owner-operators that are mentioned above have delivered long-term rewards for their shareholders. But there are also companies with owner-operators that have been poor investments.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Riverstone Holdings. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.