Shareholders May Be More Conservative With Melco International Development Limited's (HKG:200) CEO Compensation For Now

Key Insights

• Melco International Development will host its Annual General Meeting on 13th of June
• Salary of HK$18.8m is part of CEO Lawrence Ho's total remuneration
• The total compensation is 7,712% higher than the average for the industry
• Melco International Development's EPS grew by 21% over the past three years while total shareholder loss over the past three years was 55%

Shareholders of Melco International Development Limited (HKG:200) will have been dismayed by the negative share price return over the last three years. 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 13th of June. 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.

See our latest analysis for Melco International Development

How Does Total Compensation For Lawrence Ho Compare With Other Companies In The Industry?

Our data indicates that Melco International Development Limited has a market capitalization of HK$9.4b, and total annual CEO compensation was reported as HK$181m for the year to December 2023. Notably, that's a decrease of 22% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at HK$19m.

In comparison with other companies in the Hong Kong Hospitality industry with market capitalizations ranging from HK$7.8b to HK$25b, the reported median CEO total compensation was HK$2.3m. This suggests that Lawrence Ho is paid more than the median for the industry. What's more, Lawrence Ho holds HK$4.8b 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$19m	HK$10m	10%
Other	HK$162m	HK$222m	90%
Total Compensation	HK$181m	HK$233m	100%

On an industry level, around 87% of total compensation represents salary and 13% is other remuneration. Melco International Development sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Melco International Development Limited's Growth Numbers

Melco International Development Limited's earnings per share (EPS) grew 21% per year over the last three years. It achieved revenue growth of 180% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Melco International Development Limited Been A Good Investment?

The return of -55% over three years would not have pleased Melco International Development Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. 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.

So you may want to check if insiders are buying Melco International Development shares with their own money (free access).

Important note: Melco International Development 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.