Key Things To Understand About SH Group (Holdings)’s (HKG:1637) CEO Pay Cheque

The CEO of SH Group (Holdings) Limited (HKG:1637) is Man Ching Lau, and this article examines the executive’s compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for SH Group (Holdings)

How Does Total Compensation For Man Ching Lau Compare With Other Companies In The Industry?

According to our data, SH Group (Holdings) Limited has a market capitalization of HK$130m, and paid its CEO total annual compensation worth HK$2.9m over the year to March 2020. We note that’s an increase of 19% above last year. In particular, the salary of HK$2.09m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$2.0m. This suggests that Man Ching Lau is paid more than the median for the industry. Furthermore, Man Ching Lau directly owns HK$18m worth of shares in the company, implying that they are deeply invested in the company’s success.

Component20202019Proportion (2020)
Salary HK$2.1m HK$2.0m 72%
Other HK$801k HK$433k 28%
Total CompensationHK$2.9m HK$2.4m100%

On an industry level, around 91% of total compensation represents salary and 8.9% is other remuneration. SH Group (Holdings) pays a modest slice of remuneration through salary, as compared to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
SEHK:1637 CEO Compensation August 20th 2020

SH Group (Holdings) Limited’s Growth

Over the past three years, SH Group (Holdings) Limited has seen its earnings per share (EPS) grow by 30% per year. Its revenue is up 43% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. Although we don’t have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has SH Group (Holdings) Limited Been A Good Investment?

Given the total shareholder loss of 39% over three years, many shareholders in SH Group (Holdings) Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary…

As we noted earlier, SH Group (Holdings) pays its CEO higher than the norm for similar-sized companies belonging to the same industry. However, we must not forget that the EPS growth has been very strong, but shareholder returns — over the same period — have been disappointing. Although we don’t think the CEO pay is too high, considering negative investor returns, it is more generous than modest.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We’ve identified 2 warning signs for SH Group (Holdings) that investors should be aware of in a dynamic business environment.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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This article by Simply Wall St is general in nature. 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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