We Think UMP Healthcare Holdings Limited's (HKG:722) CEO Compensation Package Needs To Be Put Under A Microscope

The results at UMP Healthcare Holdings Limited (HKG:722) have been quite disappointing recently and CEO Yiu Kwong Sun bears some responsibility for this. At the upcoming AGM on 26 November 2021, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for UMP Healthcare Holdings

Comparing UMP Healthcare Holdings Limited's CEO Compensation With the industry

Our data indicates that UMP Healthcare Holdings Limited has a market capitalization of HK$612m, and total annual CEO compensation was reported as HK$7.6m for the year to June 2021. We note that's a small decrease of 6.7% on last year. In particular, the salary of HK$7.36m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$1.9m. This suggests that Yiu Kwong Sun is paid more than the median for the industry. Moreover, Yiu Kwong Sun also holds HK$185m worth of UMP Healthcare Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2021	2020	Proportion (2021)
Salary	HK$7.4m	HK$7.3m	97%
Other	HK$240k	HK$800k	3%
Total Compensation	HK$7.6m	HK$8.1m	100%

Speaking on an industry level, nearly 87% of total compensation represents salary, while the remainder of 13% is other remuneration. UMP Healthcare Holdings pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. 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 UMP Healthcare Holdings Limited's Growth Numbers

Over the last three years, UMP Healthcare Holdings Limited has shrunk its earnings per share by 3.4% per year. It achieved revenue growth of 12% over the last year.

Few shareholders would be pleased to read that EPS have declined. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 UMP Healthcare Holdings Limited Been A Good Investment?

The return of -53% over three years would not have pleased UMP Healthcare Holdings Limited shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Yiu Kwong receives almost all of their compensation through a salary. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 4 warning signs for UMP Healthcare Holdings that investors should look into moving forward.

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.

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.

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