We Discuss Why Million Cities Holdings Limited's (HKG:2892) CEO Compensation May Be Closely Reviewed

Key Insights

• Million Cities Holdings to hold its Annual General Meeting on 17th of June
• Salary of CN¥2.16m is part of CEO Ka Keung Lau's total remuneration
• The total compensation is 151% higher than the average for the industry
• Million Cities Holdings' EPS declined by 98% over the past three years while total shareholder loss over the past three years was 61%

Shareholders will probably not be too impressed with the underwhelming results at Million Cities Holdings Limited (HKG:2892) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 17th of June. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. The data we present below explains why we think CEO compensation is not consistent with recent performance.

View our latest analysis for Million Cities Holdings

How Does Total Compensation For Ka Keung Lau Compare With Other Companies In The Industry?

According to our data, Million Cities Holdings Limited has a market capitalization of HK$349m, and paid its CEO total annual compensation worth CN¥4.2m over the year to December 2023. That's a modest increase of 3.4% on the prior year. In particular, the salary of CN¥2.16m, makes up a fairly large portion of the total compensation being paid to the CEO.

For comparison, other companies in the Hong Kong Real Estate industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of CN¥1.7m. Accordingly, our analysis reveals that Million Cities Holdings Limited pays Ka Keung Lau north of the industry median.

Component	2023	2022	Proportion (2023)
Salary	CN¥2.2m	CN¥2.1m	51%
Other	CN¥2.1m	CN¥2.0m	49%
Total Compensation	CN¥4.2m	CN¥4.1m	100%

Talking in terms of the industry, salary represented approximately 77% of total compensation out of all the companies we analyzed, while other remuneration made up 23% of the pie. It's interesting to note that Million Cities Holdings 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.

Million Cities Holdings Limited's Growth

Million Cities Holdings Limited has reduced its earnings per share by 98% a year over the last three years. In the last year, its revenue is up 12%.

Overall this is not a very positive result for shareholders. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. 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 Million Cities Holdings Limited Been A Good Investment?

Few Million Cities Holdings Limited shareholders would feel satisfied with the return of -61% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid 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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 3 warning signs for Million Cities Holdings (2 are concerning!) that you should be aware of before investing here.

Switching gears from Million Cities Holdings, 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. 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.