It's Unlikely That Sterling Group Holdings Limited's (HKG:1825) CEO Will See A Huge Pay Rise This Year

Key Insights

• Sterling Group Holdings' Annual General Meeting to take place on 12th of September
• Total pay for CEO Alice Wong includes HK$3.93m salary
• Total compensation is 96% above industry average
• Sterling Group Holdings' EPS grew by 53% over the past three years while total shareholder loss over the past three years was 57%

Shareholders of Sterling Group Holdings Limited (HKG:1825) will have been dismayed by the negative share price return over the last three years. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 12th of September. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Sterling Group Holdings

How Does Total Compensation For Alice Wong Compare With Other Companies In The Industry?

Our data indicates that Sterling Group Holdings Limited has a market capitalization of HK$29m, and total annual CEO compensation was reported as HK$4.2m for the year to March 2023. That's a notable increase of 37% on last year. We note that the salary portion, which stands at HK$3.93m constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the Hong Kong Luxury industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$2.1m. This suggests that Alice Wong is paid more than the median for the industry. What's more, Alice Wong holds HK$4.8m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	HK$3.9m	HK$2.8m	95%
Other	HK$222k	HK$220k	5%
Total Compensation	HK$4.2m	HK$3.0m	100%

On an industry level, roughly 91% of total compensation represents salary and 9% is other remuneration. There isn't a significant difference between Sterling Group Holdings and the broader market, in terms of salary allocation in the overall compensation package. 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 Sterling Group Holdings Limited's Growth Numbers

Sterling Group Holdings Limited's earnings per share (EPS) grew 53% per year over the last three years. It achieved revenue growth of 37% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. 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 Sterling Group Holdings Limited Been A Good Investment?

The return of -57% over three years would not have pleased Sterling Group Holdings Limited shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. 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 compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 3 warning signs for Sterling Group Holdings (of which 1 can't be ignored!) that you should know about in order to have a holistic understanding of the stock.

Important note: Sterling Group 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.

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.