How Does AP Rentals Holdings' (HKG:1496) CEO Pay Compare With Company Performance?

Pong Sing Lau became the CEO of AP Rentals Holdings Limited (HKG:1496) in 2015, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether AP Rentals Holdings pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for AP Rentals Holdings

Comparing AP Rentals Holdings Limited's CEO Compensation With the industry

Our data indicates that AP Rentals Holdings Limited has a market capitalization of HK$173m, and total annual CEO compensation was reported as HK$2.8m for the year to March 2020. That is, the compensation was roughly the same as last year. In particular, the salary of HK$2.78m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$2.5m. So it looks like AP Rentals Holdings compensates Pong Sing Lau in line with the median for the industry. What's more, Pong Sing Lau holds HK$77m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, around 92% of total compensation represents salary and 7.7% is other remuneration. AP Rentals Holdings has gone down a largely traditional route, paying Pong Sing Lau 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.

AP Rentals Holdings Limited's Growth

AP Rentals Holdings Limited has reduced its earnings per share by 118% a year over the last three years. In the last year, its revenue is up 2.4%.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in 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 AP Rentals Holdings Limited Been A Good Investment?

Since shareholders would have lost about 40% over three years, some AP Rentals Holdings Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Pong Sing receives almost all of their compensation through a salary. As previously discussed, Pong Sing is compensated close to the median for companies of its size, and which belong to the same industry. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 2 warning signs (and 1 which is potentially serious) in AP Rentals Holdings we think you should know about.

Important note: AP Rentals 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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