Here's Why Shareholders May Want To Be Cautious With Increasing Lai Si Enterprise Holding Limited's (HKG:2266) CEO Pay Packet

Key Insights

• Lai Si Enterprise Holding's Annual General Meeting to take place on 25th of June
• Salary of MO$1.62m is part of CEO Harry Lai's total remuneration
• The overall pay is comparable to the industry average
• Lai Si Enterprise Holding's EPS grew by 95% over the past three years while total shareholder loss over the past three years was 39%

In the past three years, the share price of Lai Si Enterprise Holding Limited (HKG:2266) has struggled to grow and now shareholders are sitting on a loss. 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 25th of June 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 discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Lai Si Enterprise Holding

How Does Total Compensation For Harry Lai Compare With Other Companies In The Industry?

Our data indicates that Lai Si Enterprise Holding Limited has a market capitalization of HK$122m, and total annual CEO compensation was reported as MO$1.8m for the year to December 2023. Notably, that's an increase of 8.6% over the year before. Notably, the salary which is MO$1.62m, represents most of the total compensation being paid.

In comparison with other companies in the Hong Kong Construction industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was MO$2.2m. So it looks like Lai Si Enterprise Holding compensates Harry Lai in line with the median for the industry.

Component	2023	2022	Proportion (2023)
Salary	MO$1.6m	MO$1.6m	92%
Other	MO$141k	MO$1.0k	8%
Total Compensation	MO$1.8m	MO$1.6m	100%

Speaking on an industry level, nearly 83% of total compensation represents salary, while the remainder of 17% is other remuneration. Lai Si Enterprise Holding is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Lai Si Enterprise Holding Limited's Growth Numbers

Lai Si Enterprise Holding Limited has seen its earnings per share (EPS) increase by 95% a year over the past three years. Its revenue is down 49% over the previous year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. 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 Lai Si Enterprise Holding Limited Been A Good Investment?

The return of -39% over three years would not have pleased Lai Si Enterprise Holding Limited shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. 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.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 3 warning signs for Lai Si Enterprise Holding you should be aware of, and 2 of them are a bit concerning.

Important note: Lai Si Enterprise Holding 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com