Here's Why Shareholders Should Examine Ngai Hing Hong Company Limited's (HKG:1047) CEO Compensation Package More Closely

Key Insights

• Ngai Hing Hong will host its Annual General Meeting on 14th of November
• Total pay for CEO Kwok Kwong Hui includes HK$2.34m salary
• The overall pay is 238% above the industry average
• Ngai Hing Hong's EPS declined by 105% over the past three years while total shareholder loss over the past three years was 45%

Shareholders will probably not be too impressed with the underwhelming results at Ngai Hing Hong Company Limited (HKG:1047) recently. At the upcoming AGM on 14th of November, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for Ngai Hing Hong

Comparing Ngai Hing Hong Company Limited's CEO Compensation With The Industry

Our data indicates that Ngai Hing Hong Company Limited has a market capitalization of HK$122m, and total annual CEO compensation was reported as HK$4.4m for the year to June 2024. That's mostly flat as compared to the prior year's compensation. In particular, the salary of HK$2.34m, makes up a fairly large portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the Hong Kong Chemicals industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$1.3m. This suggests that Kwok Kwong Hui is paid more than the median for the industry. Moreover, Kwok Kwong Hui also holds HK$6.6m worth of Ngai Hing Hong stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	HK$2.3m	HK$2.3m	53%
Other	HK$2.1m	HK$2.1m	47%
Total Compensation	HK$4.4m	HK$4.4m	100%

On an industry level, roughly 74% of total compensation represents salary and 26% is other remuneration. In Ngai Hing Hong's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. 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.

Ngai Hing Hong Company Limited's Growth

Over the last three years, Ngai Hing Hong Company Limited has shrunk its earnings per share by 105% per year. It achieved revenue growth of 8.4% over the last year.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. 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 Ngai Hing Hong Company Limited Been A Good Investment?

Few Ngai Hing Hong Company Limited shareholders would feel satisfied with the return of -45% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

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, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 3 warning signs for Ngai Hing Hong you should be aware of, and 2 of them can't be ignored.

Important note: Ngai Hing Hong 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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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.