How Should Investors React To Century Sage Scientific Holdings' (HKG:1450) CEO Pay?

Chi Sum Lo is the CEO of Century Sage Scientific Holdings Limited (HKG:1450), and in this article, we analyze the executive's compensation package with respect to the overall performance of the company. 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 Century Sage Scientific Holdings

How Does Total Compensation For Chi Sum Lo Compare With Other Companies In The Industry?

According to our data, Century Sage Scientific Holdings Limited has a market capitalization of HK$102m, and paid its CEO total annual compensation worth CN¥1.8m over the year to December 2019. Notably, that's a decrease of 8.6% over the year before. We note that the salary portion, which stands at CN¥1.69m constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was CN¥2.2m. From this we gather that Chi Sum Lo is paid around the median for CEOs in the industry. Moreover, Chi Sum Lo also holds HK$61m worth of Century Sage Scientific Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 84% of total compensation represents salary and 16% is other remuneration. Although there is a difference in how total compensation is set, Century Sage Scientific Holdings more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Century Sage Scientific Holdings Limited's Growth Numbers

Century Sage Scientific Holdings Limited has reduced its earnings per share by 2.8% a year over the last three years. It saw its revenue drop 44% over the last year.

Its a bit disappointing to see that the company has failed to grow its EPS. 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 Century Sage Scientific Holdings Limited Been A Good Investment?

Since shareholders would have lost about 76% over three years, some Century Sage Scientific Holdings Limited investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.

To Conclude...

As we touched on above, Century Sage Scientific 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. Meanwhile, EPS growth and shareholder returns have been in the red for the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 4 warning signs for Century Sage Scientific Holdings (of which 2 are significant!) that you should know about in order to have a holistic understanding of the stock.

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. 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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