We Think Some Shareholders May Hesitate To Increase SH Group (Holdings) Limited's (HKG:1637) CEO Compensation

In the past three years, the share price of SH Group (Holdings) Limited (HKG:1637) has struggled to generate growth for its shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 25 August 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

Check out our latest analysis for SH Group (Holdings)

Comparing SH Group (Holdings) Limited's CEO Compensation With the industry

At the time of writing, our data shows that SH Group (Holdings) Limited has a market capitalization of HK$216m, and reported total annual CEO compensation of HK$2.9m for the year to March 2021. There was no change in the compensation compared to last year. In particular, the salary of HK$2.09m, 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$1.7m. Hence, we can conclude that Man Ching Lau is remunerated higher than the industry median. Furthermore, Man Ching Lau directly owns HK$29m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	HK$2.1m	HK$2.1m	72%
Other	HK$801k	HK$801k	28%
Total Compensation	HK$2.9m	HK$2.9m	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. It's interesting to note that SH Group (Holdings) allocates a smaller portion of compensation to salary in comparison to the broader industry. 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.

SH Group (Holdings) Limited's Growth

SH Group (Holdings) Limited has seen its earnings per share (EPS) increase by 7.4% a year over the past three years. In the last year, its revenue is up 24%.

This revenue growth could really point to a brighter future. And the modest growth in EPS isn't bad, either. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has SH Group (Holdings) Limited Been A Good Investment?

Given the total shareholder loss of 4.4% over three years, many shareholders in SH Group (Holdings) Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

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. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. 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 2 warning signs for SH Group (Holdings) that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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