What We Learned About Lung Kee (Bermuda) Holdings' (HKG:255) CEO Compensation

Yuk Lung Siu became the CEO of Lung Kee (Bermuda) Holdings Limited (HKG:255) in 1992, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Lung Kee (Bermuda) Holdings.

See our latest analysis for Lung Kee (Bermuda) Holdings

Comparing Lung Kee (Bermuda) Holdings Limited's CEO Compensation With the industry

At the time of writing, our data shows that Lung Kee (Bermuda) Holdings Limited has a market capitalization of HK$1.6b, and reported total annual CEO compensation of HK$10m for the year to December 2019. That's a slightly lower by 4.6% over the previous year. We note that the salary portion, which stands at HK$8.40m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between HK$775m and HK$3.1b had a median total CEO compensation of HK$2.6m. Accordingly, our analysis reveals that Lung Kee (Bermuda) Holdings Limited pays Yuk Lung Siu north of the industry median. What's more, Yuk Lung Siu holds HK$57m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 86% of total compensation out of all the companies we analyzed, while other remuneration made up 14% of the pie. Although there is a difference in how total compensation is set, Lung Kee (Bermuda) Holdings more or less reflects the market in terms of setting the salary. 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.

Lung Kee (Bermuda) Holdings Limited's Growth

Over the last three years, Lung Kee (Bermuda) Holdings Limited has shrunk its earnings per share by 18% per year. Its revenue is down 9.5% over the previous year.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Lung Kee (Bermuda) Holdings Limited Been A Good Investment?

With a three year total loss of 7.4% for the shareholders, Lung Kee (Bermuda) Holdings Limited would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be lessto generous with CEO compensation.

To Conclude...

As we noted earlier, Lung Kee (Bermuda) Holdings pays its CEO higher than the norm for similar-sized companies belonging to the same industry. This doesn't look good against shareholder returns, which have been negative for the past three years. Arguably worse, we've been waiting for positive EPS growth for the last three years. Considering such poor performance, we think shareholders might be concerned if the CEO's compensation were to grow.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for Lung Kee (Bermuda) Holdings that investors should think about before committing capital to this stock.

Important note: Lung Kee (Bermuda) 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. 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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