It Looks Like Cosmos Machinery Enterprises Limited's (HKG:118) CEO May Expect Their Salary To Be Put Under The Microscope

Key Insights

• Cosmos Machinery Enterprises' Annual General Meeting to take place on 29th of May
• CEO Freeman Tang's total compensation includes salary of HK$2.08m
• Total compensation is similar to the industry average
• Over the past three years, Cosmos Machinery Enterprises' EPS fell by 57% and over the past three years, the total loss to shareholders 58%

The results at Cosmos Machinery Enterprises Limited (HKG:118) have been quite disappointing recently and CEO Freeman Tang bears some responsibility for this. At the upcoming AGM on 29th of May, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Cosmos Machinery Enterprises

How Does Total Compensation For Freeman Tang Compare With Other Companies In The Industry?

According to our data, Cosmos Machinery Enterprises Limited has a market capitalization of HK$190m, and paid its CEO total annual compensation worth HK$2.7m over the year to December 2023. This means that the compensation hasn't changed much from last year. In particular, the salary of HK$2.08m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the Hong Kong Machinery industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$2.1m. This suggests that Cosmos Machinery Enterprises remunerates its CEO largely in line with the industry average.

Component	2023	2022	Proportion (2023)
Salary	HK$2.1m	HK$2.1m	77%
Other	HK$625k	HK$649k	23%
Total Compensation	HK$2.7m	HK$2.7m	100%

On an industry level, roughly 77% of total compensation represents salary and 23% is other remuneration. Although there is a difference in how total compensation is set, Cosmos Machinery Enterprises more or less reflects the market in terms of setting the salary. 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 Cosmos Machinery Enterprises Limited's Growth Numbers

Over the last three years, Cosmos Machinery Enterprises Limited has shrunk its earnings per share by 57% per year. Its revenue is down 7.0% over the previous year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Cosmos Machinery Enterprises Limited Been A Good Investment?

With a total shareholder return of -58% over three years, Cosmos Machinery Enterprises Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 2 warning signs for Cosmos Machinery Enterprises you should be aware of, and 1 of them is a bit unpleasant.

Important note: Cosmos Machinery Enterprises 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. 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.