What Can We Learn About NewOcean Energy Holdings' (HKG:342) CEO Compensation?

This article will reflect on the compensation paid to Lawrence Shum who has served as CEO of NewOcean Energy Holdings Limited (HKG:342) since 2009. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for NewOcean Energy Holdings

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

Our data indicates that NewOcean Energy Holdings Limited has a market capitalization of HK$1.1b, and total annual CEO compensation was reported as HK$1.1m for the year to December 2019. That's a fairly small increase of 7.6% over the previous year. We note that the salary portion, which stands at HK$1.12m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$1.3m. This suggests that NewOcean Energy Holdings remunerates its CEO largely in line with the industry average. Furthermore, Lawrence Shum directly owns HK$43m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 85% of total compensation out of all the companies we analyzed, while other remuneration made up 15% of the pie. Investors will find it interesting that NewOcean Energy Holdings pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at NewOcean Energy Holdings Limited's Growth Numbers

Over the last three years, NewOcean Energy Holdings Limited has shrunk its earnings per share by 47% per year. It saw its revenue drop 19% over the last year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet 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 NewOcean Energy Holdings Limited Been A Good Investment?

With a three year total loss of 61% for the shareholders, NewOcean Energy Holdings Limited would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

NewOcean Energy Holdings pays its CEO a majority of compensation through a salary. As we touched on above, NewOcean Energy Holdings Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. Considering overall performance, shareholders will likely hold off support for a raise until results improve.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 2 warning signs (and 1 which shouldn't be ignored) in NewOcean Energy Holdings we think you should know about.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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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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