Shareholders Will Probably Hold Off On Increasing Starlite Holdings Limited's (HKG:403) CEO Compensation For The Time Being

Despite Starlite Holdings Limited's (HKG:403) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. Some of these issues will occupy shareholders' minds as the AGM rolls around on 20 August 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Starlite Holdings

Comparing Starlite Holdings Limited's CEO Compensation With the industry

Our data indicates that Starlite Holdings Limited has a market capitalization of HK$181m, and total annual CEO compensation was reported as HK$5.3m for the year to March 2021. This means that the compensation hasn't changed much from last year. In particular, the salary of HK$4.15m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$2.4m. This suggests that Kwong Yu Lam is paid more than the median for the industry. Moreover, Kwong Yu Lam also holds HK$70m worth of Starlite 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$4.1m	HK$4.3m	79%
Other	HK$1.1m	HK$1.1m	21%
Total Compensation	HK$5.3m	HK$5.4m	100%

Speaking on an industry level, nearly 67% of total compensation represents salary, while the remainder of 33% is other remuneration. According to our research, Starlite Holdings has allocated a higher percentage of pay to salary in comparison to the wider 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.

A Look at Starlite Holdings Limited's Growth Numbers

Over the last three years, Starlite Holdings Limited has shrunk its earnings per share by 11% per year. It saw its revenue drop 6.9% over the last year.

Overall this is not a very positive result for shareholders. 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. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Starlite Holdings Limited Been A Good Investment?

Starlite Holdings Limited has generated a total shareholder return of 5.2% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

In Summary...

Shareholder returns, while positive, should be looked at along with earnings, which have not grown at all recently. This makes us think the share price momentum may slow in the future. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for Starlite Holdings (1 is significant!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.
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