We Discuss Why Paliburg Holdings Limited's (HKG:617) CEO Compensation May Be Closely Reviewed

By
Simply Wall St
Published
June 01, 2021
SEHK:617
Source: Shutterstock

The results at Paliburg Holdings Limited (HKG:617) have been quite disappointing recently and CEO Yuk Sui Lo bears some responsibility for this. At the upcoming AGM on 08 June 2021, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

See our latest analysis for Paliburg Holdings

Comparing Paliburg Holdings Limited's CEO Compensation With the industry

According to our data, Paliburg Holdings Limited has a market capitalization of HK$2.4b, and paid its CEO total annual compensation worth HK$14m over the year to December 2020. That's a notable decrease of 14% on last year. Notably, the salary which is HK$12.4m, represents most of the total compensation being paid.

On examining similar-sized companies in the industry with market capitalizations between HK$1.6b and HK$6.2b, we discovered that the median CEO total compensation of that group was HK$2.4m. This suggests that Yuk Sui Lo is paid more than the median for the industry. What's more, Yuk Sui Lo holds HK$260m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary HK$12m HK$13m 88%
Other HK$1.8m HK$3.0m 12%
Total CompensationHK$14m HK$16m100%

Speaking on an industry level, nearly 87% of total compensation represents salary, while the remainder of 13% is other remuneration. There isn't a significant difference between Paliburg Holdings and the broader market, in terms of salary allocation in the overall compensation package. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
SEHK:617 CEO Compensation June 1st 2021

A Look at Paliburg Holdings Limited's Growth Numbers

Over the last three years, Paliburg Holdings Limited has shrunk its earnings per share by 114% per year. In the last year, its revenue is down 50%.

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. 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 Paliburg Holdings Limited Been A Good Investment?

With a total shareholder return of -36% over three years, Paliburg Holdings Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 2 warning signs for Paliburg Holdings that investors should be aware of in a dynamic business environment.

Important note: Paliburg 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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