We Discuss Why Lumina Group Limited's (HKG:1162) CEO Compensation May Be Closely Reviewed

Key Insights

• Lumina Group to hold its Annual General Meeting on 13th of September
• Total pay for CEO Hau Fai Fok includes HK$3.60m salary
• Total compensation is 328% above industry average
• Lumina Group's EPS declined by 106% over the past three years while total shareholder loss over the past three years was 30%

The results at Lumina Group Limited (HKG:1162) have been quite disappointing recently and CEO Hau Fai Fok bears some responsibility for this. At the upcoming AGM on 13th of September, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. From our analysis, we think CEO compensation may need a review in light of the recent performance.

Check out our latest analysis for Lumina Group

How Does Total Compensation For Hau Fai Fok Compare With Other Companies In The Industry?

According to our data, Lumina Group Limited has a market capitalization of HK$95m, and paid its CEO total annual compensation worth HK$7.9m over the year to March 2024. This was the same as last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at HK$3.6m.

For comparison, other companies in the Hong Kong Commercial Services industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$1.9m. Hence, we can conclude that Hau Fai Fok is remunerated higher than the industry median. What's more, Hau Fai Fok holds HK$65m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2024	2023	Proportion (2024)
Salary	HK$3.6m	HK$3.6m	45%
Other	HK$4.3m	HK$4.3m	55%
Total Compensation	HK$7.9m	HK$7.9m	100%

Talking in terms of the industry, salary represented approximately 81% of total compensation out of all the companies we analyzed, while other remuneration made up 19% of the pie. In Lumina Group's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Lumina Group Limited's Growth

Lumina Group Limited has reduced its earnings per share by 106% a year over the last three years. Its revenue is down 41% over the previous year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Lumina Group Limited Been A Good Investment?

With a total shareholder return of -30% over three years, Lumina Group Limited shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. 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. That's why we did our research, and identified 2 warning signs for Lumina Group (of which 1 can't be ignored!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Lumina Group, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.