Increases to CEO Compensation Might Be Put On Hold For Now at Hong Kong Shanghai Alliance Holdings Limited (HKG:1001)

The underwhelming share price performance of Hong Kong Shanghai Alliance Holdings Limited (HKG:1001) in the past three years would have disappointed many shareholders. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. These are some of the concerns that shareholders may want to bring up at the next AGM held on 11 August 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

View our latest analysis for Hong Kong Shanghai Alliance Holdings

Comparing Hong Kong Shanghai Alliance Holdings Limited's CEO Compensation With the industry

At the time of writing, our data shows that Hong Kong Shanghai Alliance Holdings Limited has a market capitalization of HK$173m, and reported total annual CEO compensation of HK$7.1m for the year to March 2021. That's slightly lower by 4.5% over the previous year. In particular, the salary of HK$5.12m, 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$2.5m. Accordingly, our analysis reveals that Hong Kong Shanghai Alliance Holdings Limited pays Andrew Yao north of the industry median. Furthermore, Andrew Yao directly owns HK$25m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	HK$5.1m	HK$5.4m	72%
Other	HK$2.0m	HK$2.0m	28%
Total Compensation	HK$7.1m	HK$7.4m	100%

On an industry level, roughly 92% of total compensation represents salary and 8% is other remuneration. In Hong Kong Shanghai Alliance Holdings' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at Hong Kong Shanghai Alliance Holdings Limited's Growth Numbers

Hong Kong Shanghai Alliance Holdings Limited has seen its earnings per share (EPS) increase by 35% a year over the past three years. Its revenue is down 11% over the previous year.

Shareholders would be glad to know that the company has improved itself over the last few years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Hong Kong Shanghai Alliance Holdings Limited Been A Good Investment?

Few Hong Kong Shanghai Alliance Holdings Limited shareholders would feel satisfied with the return of -60% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 4 warning signs for Hong Kong Shanghai Alliance Holdings you should be aware of, and 2 of them make us uncomfortable.

Important note: Hong Kong Shanghai Alliance Holdings is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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