Shareholders May Not Be So Generous With Linekong Interactive Group Co., Ltd.'s (HKG:8267) CEO Compensation And Here's Why

In the past three years, the share price of Linekong Interactive Group Co., Ltd. (HKG:8267) has struggled to grow and now shareholders are sitting on a loss. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 18 June 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Linekong Interactive Group

Comparing Linekong Interactive Group Co., Ltd.'s CEO Compensation With the industry

According to our data, Linekong Interactive Group Co., Ltd. has a market capitalization of HK$227m, and paid its CEO total annual compensation worth CN¥3.0m over the year to December 2020. That's a fairly small increase of 3.8% over the previous year. We note that the salary of CN¥1.76m makes up a sizeable portion of the 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¥1.2m. Hence, we can conclude that Mingxiang Liao is remunerated higher than the industry median. Furthermore, Mingxiang Liao directly owns HK$11m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	CN¥1.8m	CN¥1.8m	59%
Other	CN¥1.2m	CN¥1.1m	41%
Total Compensation	CN¥3.0m	CN¥2.9m	100%

On an industry level, roughly 88% of total compensation represents salary and 12% is other remuneration. It's interesting to note that Linekong Interactive Group allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Linekong Interactive Group Co., Ltd.'s Growth Numbers

Linekong Interactive Group Co., Ltd.'s earnings per share (EPS) grew 60% per year over the last three years. It saw its revenue drop 25% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. 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 Linekong Interactive Group Co., Ltd. Been A Good Investment?

With a total shareholder return of -32% over three years, Linekong Interactive Group Co., Ltd. shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for Linekong Interactive Group that investors should think about before committing capital to this stock.

Switching gears from Linekong Interactive Group, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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