Should Shareholders Reconsider Thelloy Development Group Limited's (HKG:1546) CEO Compensation Package?

Shareholders will probably not be too impressed with the underwhelming results at Thelloy Development Group Limited (HKG:1546) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 13 August 2021. 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. From our analysis, we think CEO compensation may need a review in light of the recent performance.

Check out our latest analysis for Thelloy Development Group

How Does Total Compensation For Eddie Lam Compare With Other Companies In The Industry?

At the time of writing, our data shows that Thelloy Development Group Limited has a market capitalization of HK$192m, and reported total annual CEO compensation of HK$2.3m for the year to March 2021. That's a slight decrease of 6.6% on the prior year. In particular, the salary of HK$2.24m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$1.8m. This suggests that Thelloy Development Group remunerates its CEO largely in line with the industry average. What's more, Eddie Lam holds HK$139m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2021	2020	Proportion (2021)
Salary	HK$2.2m	HK$2.4m	99%
Other	HK$18k	HK$18k	1%
Total Compensation	HK$2.3m	HK$2.4m	100%

On an industry level, roughly 90% of total compensation represents salary and 10% is other remuneration. Thelloy Development Group 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 dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Thelloy Development Group Limited's Growth

Over the last three years, Thelloy Development Group Limited has shrunk its earnings per share by 30% per year. It saw its revenue drop 72% over the last year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Thelloy Development Group Limited Been A Good Investment?

With a total shareholder return of -57% over three years, Thelloy Development Group Limited shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Thelloy Development Group pays its CEO a majority of compensation through a salary. 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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 4 warning signs for Thelloy Development Group you should be aware of, and 1 of them is potentially serious.

Important note: Thelloy Development Group 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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