We Discuss Why Tak Lee Machinery Holdings Limited's (HKG:2102) CEO Compensation May Be Closely Reviewed

Key Insights

• Tak Lee Machinery Holdings' Annual General Meeting to take place on 26th of November
• Salary of HK$2.64m is part of CEO Luen Fat Chow's total remuneration
• Total compensation is 44% above industry average
• Tak Lee Machinery Holdings' EPS declined by 49% over the past three years while total shareholder loss over the past three years was 51%

The results at Tak Lee Machinery Holdings Limited (HKG:2102) have been quite disappointing recently and CEO Luen Fat Chow bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 26th of November. 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.

View our latest analysis for Tak Lee Machinery Holdings

Comparing Tak Lee Machinery Holdings Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Tak Lee Machinery Holdings Limited has a market capitalization of HK$140m, and reported total annual CEO compensation of HK$3.1m for the year to July 2024. There was no change in the compensation compared to last year. Notably, the salary which is HK$2.64m, represents most of the total compensation being paid.

On comparing similar-sized companies in the Hong Kong Trade Distributors industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$2.2m. Accordingly, our analysis reveals that Tak Lee Machinery Holdings Limited pays Luen Fat Chow north of the industry median.

Component	2024	2023	Proportion (2024)
Salary	HK$2.6m	HK$2.6m	85%
Other	HK$471k	HK$471k	15%
Total Compensation	HK$3.1m	HK$3.1m	100%

On an industry level, roughly 93% of total compensation represents salary and 7% is other remuneration. There isn't a significant difference between Tak Lee Machinery Holdings and the broader market, in terms of salary allocation in the overall compensation package. 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.

Tak Lee Machinery Holdings Limited's Growth

Over the last three years, Tak Lee Machinery Holdings Limited has shrunk its earnings per share by 49% per year. It achieved revenue growth of 2.7% over the last year.

Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Tak Lee Machinery Holdings Limited Been A Good Investment?

Few Tak Lee Machinery Holdings Limited shareholders would feel satisfied with the return of -51% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a 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 a bit concerning) in Tak Lee Machinery Holdings we think you should know about.

Important note: Tak Lee Machinery 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. 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.