Shareholders May Be More Conservative With Allan International Holdings Limited's (HKG:684) CEO Compensation For Now

Simply Wall St
August 11, 2021
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Despite positive share price growth of 8.9% for Allan International Holdings Limited (HKG:684) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 18 August 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

See our latest analysis for Allan International Holdings

Comparing Allan International Holdings Limited's CEO Compensation With the industry

Our data indicates that Allan International Holdings Limited has a market capitalization of HK$657m, and total annual CEO compensation was reported as HK$5.8m for the year to March 2021. Notably, that's an increase of 18% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at HK$2.8m.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$3.5m. Accordingly, our analysis reveals that Allan International Holdings Limited pays Albert Cheung north of the industry median. Furthermore, Albert Cheung directly owns HK$97m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20212020Proportion (2021)
Salary HK$2.8m HK$2.9m 48%
Other HK$3.0m HK$1.9m 52%
Total CompensationHK$5.8m HK$4.9m100%

Talking in terms of the industry, salary represented approximately 80% of total compensation out of all the companies we analyzed, while other remuneration made up 20% of the pie. In Allan International Holdings' 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.

SEHK:684 CEO Compensation August 11th 2021

A Look at Allan International Holdings Limited's Growth Numbers

Earnings per share at Allan International Holdings Limited are much the same as they were three years ago, albeit slightly lower. In the last year, its revenue is down 7.5%.

Its a bit disappointing to see that the company has failed to grow its EPS. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Allan International Holdings Limited Been A Good Investment?

With a total shareholder return of 8.9% over three years, Allan International Holdings Limited has done okay by shareholders, but there's always room for improvement. In light of that, investors might probably want to see an improvement on their returns before they feel generous about increasing the CEO remuneration.

To Conclude...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

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 3 warning signs for Allan International Holdings (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Allan International 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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