This Is Why Reach New Holdings Limited's (HKG:8471) CEO Compensation Looks Appropriate

Shareholders may be wondering what CEO Gabi Lam plans to do to improve the less than great performance at Reach New Holdings Limited (HKG:8471) recently. At the next AGM coming up on 03 May 2021, they can influence managerial decision making through voting on resolutions, including executive remuneration. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

View our latest analysis for Reach New Holdings

Comparing Reach New Holdings Limited's CEO Compensation With the industry

Our data indicates that Reach New Holdings Limited has a market capitalization of HK$646m, and total annual CEO compensation was reported as CN¥653k for the year to December 2020. Notably, that's a decrease of 30% over the year before. In particular, the salary of CN¥637.0k, makes up a huge portion of the total compensation being paid to 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 CN¥1.9m. In other words, Reach New Holdings pays its CEO lower than the industry median.

Component	2020	2019	Proportion (2020)
Salary	CN¥637k	CN¥917k	98%
Other	CN¥16k	CN¥16k	2%
Total Compensation	CN¥653k	CN¥933k	100%

Talking in terms of the industry, salary represented approximately 93% of total compensation out of all the companies we analyzed, while other remuneration made up 7% of the pie. Investors will find it interesting that Reach New Holdings pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. 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 Reach New Holdings Limited's Growth Numbers

Over the last three years, Reach New Holdings Limited has shrunk its earnings per share by 42% per year. It saw its revenue drop 20% over the last year.

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. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Reach New Holdings Limited Been A Good Investment?

Boasting a total shareholder return of 158% over three years, Reach New Holdings Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

Gabi receives almost all of their compensation through a salary. While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us wonder if these strong returns can continue. These are are some concerns that shareholders may want to address the board when they revisit their investment thesis.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 4 warning signs for Reach New Holdings (1 is a bit unpleasant!) 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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