We Think Shareholders May Want To Consider A Review Of Perennial International Limited's (HKG:725) CEO Compensation Package

The results at Perennial International Limited (HKG:725) have been quite disappointing recently and CEO Chung Hung Mon 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 18 May 2021. 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. From our analysis, we think CEO compensation may need a review in light of the recent performance.

See our latest analysis for Perennial International

How Does Total Compensation For Chung Hung Mon Compare With Other Companies In The Industry?

According to our data, Perennial International Limited has a market capitalization of HK$163m, and paid its CEO total annual compensation worth HK$4.3m over the year to December 2020. That's a notable decrease of 10% on last year. Notably, the salary which is HK$3.66m, represents most of the total compensation being paid.

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$1.2m. Hence, we can conclude that Chung Hung Mon is remunerated higher than the industry median.

Component	2020	2019	Proportion (2020)
Salary	HK$3.7m	HK$4.6m	86%
Other	HK$616k	HK$197k	14%
Total Compensation	HK$4.3m	HK$4.8m	100%

On an industry level, around 86% of total compensation represents salary and 14% is other remuneration. Although there is a difference in how total compensation is set, Perennial International 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.

Perennial International Limited's Growth

Over the last three years, Perennial International Limited has shrunk its earnings per share by 117% per year. Its revenue is down 6.2% over the previous year.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. 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 Perennial International Limited Been A Good Investment?

With a total shareholder return of -51% over three years, Perennial International Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

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, the board will get the chance to explain the steps it plans to take to improve business performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 3 warning signs (and 1 which doesn't sit too well with us) in Perennial International we think you should know about.

Important note: Perennial International 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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