Stock Analysis

Shareholders May Be Wary Of Increasing MECOM Power and Construction Limited's (HKG:1183) CEO Compensation Package

SEHK:1183
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Key Insights

Shareholders will probably not be too impressed with the underwhelming results at MECOM Power and Construction Limited (HKG:1183) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 30th of May. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

View our latest analysis for MECOM Power and Construction

How Does Total Compensation For Sotto Tou Compare With Other Companies In The Industry?

Our data indicates that MECOM Power and Construction Limited has a market capitalization of HK$793m, and total annual CEO compensation was reported as MO$4.6m for the year to December 2023. Notably, that's an increase of 9.4% over the year before. In particular, the salary of MO$4.20m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the Hong Kong Construction industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of MO$2.2m. Hence, we can conclude that Sotto Tou is remunerated higher than the industry median.

Component20232022Proportion (2023)
Salary MO$4.2m MO$4.2m 92%
Other MO$351k MO$1.0k 8%
Total CompensationMO$4.6m MO$4.2m100%

On an industry level, roughly 83% of total compensation represents salary and 17% is other remuneration. It's interesting to note that MECOM Power and Construction pays out a greater portion of remuneration through salary, compared to the 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:1183 CEO Compensation May 23rd 2024

A Look at MECOM Power and Construction Limited's Growth Numbers

Over the last three years, MECOM Power and Construction Limited has shrunk its earnings per share by 26% per year. It achieved revenue growth of 12% over the last year.

The decline in EPS is a bit concerning. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has MECOM Power and Construction Limited Been A Good Investment?

With a total shareholder return of -86% over three years, MECOM Power and Construction Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. 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 compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 1 warning sign for MECOM Power and Construction that investors should be aware of in a dynamic business environment.

Important note: MECOM Power and Construction 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.

Valuation is complex, but we're helping make it simple.

Find out whether MECOM Power and Construction is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.