How Should Investors React To Speed Apparel Holding's (HKG:3860) CEO Pay?

This article will reflect on the compensation paid to Wing Kai Chan who has served as CEO of Speed Apparel Holding Limited (HKG:3860) since 2017. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Speed Apparel Holding

How Does Total Compensation For Wing Kai Chan Compare With Other Companies In The Industry?

Our data indicates that Speed Apparel Holding Limited has a market capitalization of HK$248m, and total annual CEO compensation was reported as HK$2.2m for the year to March 2020. This means that the compensation hasn't changed much from last year. We note that the salary portion, which stands at HK$2.21m constitutes the majority of total compensation received by the CEO.

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$2.5m. So it looks like Speed Apparel Holding compensates Wing Kai Chan in line with the median for the industry. Moreover, Wing Kai Chan also holds HK$206m worth of Speed Apparel Holding stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Speaking on an industry level, nearly 93% of total compensation represents salary, while the remainder of 7.4% is other remuneration. Speed Apparel Holding is focused on going down a more traditional approach and is paying a higher portion of compensation through salary, as compared to non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Speed Apparel Holding Limited's Growth Numbers

Over the last three years, Speed Apparel Holding Limited has shrunk its earnings per share by 3.2% per year. In the last year, its revenue is down 18%.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. 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 Speed Apparel Holding Limited Been A Good Investment?

With a total shareholder return of 26% over three years, Speed Apparel Holding Limited shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

In Summary...

Speed Apparel Holding pays its CEO a majority of compensation through a salary. As we noted earlier, Speed Apparel Holding pays its CEO in line with similar-sized companies belonging to the same industry. Speed Apparel Holding has had a tough time in recent years, with declining EPS growth, and although shareholder returns are stable, they are hardly worth celebrating. This doesn't compare well with CEO compensation, which is largely in line with the industry median. We would stop short of the compensation is inappropriate, but we can't say the executive is underpaid.

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. We identified 3 warning signs for Speed Apparel Holding (1 doesn't sit too well with us!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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