We Think Shareholders Are Less Likely To Approve A Pay Rise For Lai Fung Holdings Limited's (HKG:1125) CEO For Now

Key Insights

• Lai Fung Holdings' Annual General Meeting to take place on 15th of December
• Total pay for CEO Lester Lam includes HK$1.61m salary
• The overall pay is comparable to the industry average
• Lai Fung Holdings' three-year loss to shareholders was 64% while its EPS grew by 50% over the past three years

The underwhelming share price performance of Lai Fung Holdings Limited (HKG:1125) in the past three years would have disappointed many shareholders. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. The AGM coming up on the 15th of December could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Lai Fung Holdings

How Does Total Compensation For Lester Lam Compare With Other Companies In The Industry?

At the time of writing, our data shows that Lai Fung Holdings Limited has a market capitalization of HK$751m, and reported total annual CEO compensation of HK$1.6m for the year to July 2023. We note that's a small decrease of 3.6% on last year. Notably, the salary which is HK$1.61m, represents most of the total compensation being paid.

On comparing similar-sized companies in the Hong Kong Real Estate industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$2.1m. So it looks like Lai Fung Holdings compensates Lester Lam in line with the median for the industry.

Component	2023	2022	Proportion (2023)
Salary	HK$1.6m	HK$1.7m	99%
Other	HK$18k	HK$18k	1%
Total Compensation	HK$1.6m	HK$1.7m	100%

On an industry level, roughly 77% of total compensation represents salary and 23% is other remuneration. Lai Fung Holdings has gone down a largely traditional route, paying Lester Lam a high salary, giving it preference over non-salary benefits. 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 Lai Fung Holdings Limited's Growth Numbers

Lai Fung Holdings Limited has seen its earnings per share (EPS) increase by 50% a year over the past three years. Its revenue is down 28% over the previous year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Lai Fung Holdings Limited Been A Good Investment?

With a total shareholder return of -64% over three years, Lai Fung Holdings Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Lai Fung Holdings pays its CEO a majority of compensation through a salary. Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. 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.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Lai Fung Holdings (of which 2 are significant!) that you should know about in order to have a holistic understanding of the stock.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.