Shareholders May Find It Hard To Justify Increasing In Construction Holdings Limited's (HKG:1500) CEO Compensation For Now

In the past three years, the share price of In Construction Holdings Limited (HKG:1500) has struggled to grow and now shareholders are sitting on a loss. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 03 September 2021. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for In Construction Holdings

Comparing In Construction Holdings Limited's CEO Compensation With the industry

Our data indicates that In Construction Holdings Limited has a market capitalization of HK$182m, and total annual CEO compensation was reported as HK$1.5m for the year to March 2021. Notably, that's a decrease of 8.3% over the year before. Notably, the salary which is HK$1.51m, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$1.8m. From this we gather that Pak Man Lau is paid around the median for CEOs in the industry. Furthermore, Pak Man Lau directly owns HK$61m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	HK$1.5m	HK$1.5m	98%
Other	HK$26k	HK$189k	2%
Total Compensation	HK$1.5m	HK$1.7m	100%

Talking in terms of the industry, salary represented approximately 90% of total compensation out of all the companies we analyzed, while other remuneration made up 10% of the pie. In Construction Holdings is focused on going down a more traditional approach and is paying a higher portion of compensation through salary, as compared to non-salary benefits. 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.

In Construction Holdings Limited's Growth

In Construction Holdings Limited has seen its earnings per share (EPS) increase by 7.6% a year over the past three years. In the last year, its revenue is down 3.8%.

We would argue that the lack of revenue growth in the last year is less than ideal, but the modest EPS growth gives us some relief. It's hard to reach a conclusion about business performance right now. This may be one to watch. 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 In Construction Holdings Limited Been A Good Investment?

The return of -39% over three years would not have pleased In Construction Holdings Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

In Construction Holdings pays its CEO a majority of compensation through a salary. Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. 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.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 2 warning signs for In Construction Holdings you should be aware of, and 1 of them is a bit concerning.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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.
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