We Think Shareholders Are Less Likely To Approve A Pay Rise For Central Development Holdings Limited's (HKG:475) CEO For Now

By
Simply Wall St
Published
August 26, 2021
SEHK:475
Source: Shutterstock

The underwhelming share price performance of Central Development Holdings Limited (HKG:475) in the past three years would have disappointed many shareholders. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 02 September 2021. They could also influence management through voting on resolutions such as executive remuneration. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Central Development Holdings

Comparing Central Development Holdings Limited's CEO Compensation With the industry

At the time of writing, our data shows that Central Development Holdings Limited has a market capitalization of HK$349m, and reported total annual CEO compensation of HK$2.3m for the year to March 2021. There was no change in the compensation compared to last year. Notably, the salary which is HK$1.95m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$2.3m. So it looks like Central Development Holdings compensates Hubert Chan in line with the median for the industry. Moreover, Hubert Chan also holds HK$3.0m worth of Central Development Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20212020Proportion (2021)
Salary HK$2.0m HK$2.0m 86%
Other HK$316k HK$316k 14%
Total CompensationHK$2.3m HK$2.3m100%

Talking in terms of the industry, salary represented approximately 90% of total compensation out of all the companies we analyzed, while other remuneration made up 10% of the pie. Although there is a difference in how total compensation is set, Central Development Holdings more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
SEHK:475 CEO Compensation August 26th 2021

Central Development Holdings Limited's Growth

Earnings per share at Central Development Holdings Limited are much the same as they were three years ago, albeit with slightly higher. Its revenue is down 49% over the previous year.

We generally like to see a little revenue growth, but the modest improvement in EPS is good. It's hard to reach a conclusion about business performance right now. This may be one to watch. 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 Central Development Holdings Limited Been A Good Investment?

Since shareholders would have lost about 15% over three years, some Central Development Holdings Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

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. Shareholders would be keen to know what's holding the stock back when earnings have grown. 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.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 2 warning signs for Central Development Holdings that investors should look into moving forward.

Important note: Central Development 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.

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