The CEO of Mainland Headwear Holdings Limited (HKG:1100) is Pauline Ngan. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Pauline Ngan’s Compensation Compare With Similar Sized Companies?
Our data indicates that Mainland Headwear Holdings Limited is worth HK$365m, and total annual CEO compensation was reported as HK$5.6m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at HK$1.6m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We examined a group of similar sized companies, with market capitalizations of below HK$1.6b. The median CEO total compensation in that group is HK$1.8m.
It would therefore appear that Mainland Headwear Holdings Limited pays Pauline Ngan more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at Mainland Headwear Holdings has changed from year to year.
Is Mainland Headwear Holdings Limited Growing?
On average over the last three years, Mainland Headwear Holdings Limited has shrunk earnings per share by 2.9% each year (measured with a line of best fit). In the last year, its revenue is up 16%.
In the last three years the company has failed to grow earnings per share. And while it’s good to see some good revenue growth recently, the growth isn’t really fast enough for me to put aside my concerns around earnings. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don’t have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Mainland Headwear Holdings Limited Been A Good Investment?
Since shareholders would have lost about 39% over three years, some Mainland Headwear Holdings Limited shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.
We compared the total CEO remuneration paid by Mainland Headwear Holdings Limited, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
Earnings per share have not grown in three years, and the revenue growth fails to impress us. Over the same period, investors would have come away with nothing in the way of share price gains. In our opinion the CEO might be paid too generously! Shareholders may want to check for free if Mainland Headwear Holdings insiders are buying or selling shares.
Important note: Mainland Headwear Holdings may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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