We Think Lap Kei Engineering (Holdings) Limited's (HKG:1690) CEO Compensation Package Needs To Be Put Under A Microscope

Lap Kei Engineering (Holdings) Limited (HKG:1690) has not performed well recently and CEO Kang Kwong Wong will probably need to up their game. At the upcoming AGM on 11 May 2021, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. From our analysis, we think CEO compensation may need a review in light of the recent performance.

View our latest analysis for Lap Kei Engineering (Holdings)

Comparing Lap Kei Engineering (Holdings) Limited's CEO Compensation With the industry

According to our data, Lap Kei Engineering (Holdings) Limited has a market capitalization of HK$117m, and paid its CEO total annual compensation worth HK$2.7m over the year to December 2020. Notably, that's an increase of 26% over the year before. In particular, the salary of HK$2.72m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$1.8m. Hence, we can conclude that Kang Kwong Wong is remunerated higher than the industry median. Moreover, Kang Kwong Wong also holds HK$11m worth of Lap Kei Engineering (Holdings) stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	HK$2.7m	HK$2.2m	99%
Other	HK$18k	HK$18k	1%
Total Compensation	HK$2.7m	HK$2.2m	100%

On an industry level, roughly 91% of total compensation represents salary and 9% is other remuneration. Investors will find it interesting that Lap Kei Engineering (Holdings) pays the bulk of its rewards through a traditional salary, instead of 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.

Lap Kei Engineering (Holdings) Limited's Growth

Lap Kei Engineering (Holdings) Limited has reduced its earnings per share by 92% a year over the last three years. In the last year, its revenue is down 14%.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. 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 Lap Kei Engineering (Holdings) Limited Been A Good Investment?

With a total shareholder return of -77% over three years, Lap Kei Engineering (Holdings) Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Lap Kei Engineering (Holdings) pays its CEO a majority of compensation through a salary. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 3 warning signs (and 1 which is concerning) in Lap Kei Engineering (Holdings) we think you should know about.

Important note: Lap Kei Engineering (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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