We Think Some Shareholders May Hesitate To Increase Chuan Holdings Limited's (HKG:1420) CEO Compensation

Key Insights

• Chuan Holdings' Annual General Meeting to take place on 31st of May
• Salary of S$1.04m is part of CEO Alan Lim's total remuneration
• The overall pay is 182% above the industry average
• Chuan Holdings' EPS grew by 104% over the past three years while total shareholder loss over the past three years was 28%

In the past three years, the share price of Chuan Holdings Limited (HKG:1420) has struggled to grow and now shareholders are sitting on a loss. 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 31st of May. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Chuan Holdings

Comparing Chuan Holdings Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Chuan Holdings Limited has a market capitalization of HK$91m, and reported total annual CEO compensation of S$1.1m for the year to December 2023. That's a modest increase of 3.8% on the prior year. In particular, the salary of S$1.04m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the Hong Kong Construction industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was S$373k. Hence, we can conclude that Alan Lim is remunerated higher than the industry median. Moreover, Alan Lim also holds HK$40m worth of Chuan Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	S$1.0m	S$1.0m	99%
Other	S$12k	S$12k	1%
Total Compensation	S$1.1m	S$1.0m	100%

Speaking on an industry level, nearly 83% of total compensation represents salary, while the remainder of 17% is other remuneration. Chuan Holdings has gone down a largely traditional route, paying Alan Lim a high salary, giving it preference over non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Chuan Holdings Limited's Growth

Chuan Holdings Limited has seen its earnings per share (EPS) increase by 104% a year over the past three years. It achieved revenue growth of 36% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Chuan Holdings Limited Been A Good Investment?

With a three year total loss of 28% for the shareholders, Chuan Holdings Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Alan receives almost all of their compensation through a salary. Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 4 warning signs for Chuan Holdings that you should be aware of before investing.

Important note: Chuan 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.