We Think Shareholders May Want To Consider A Review Of Lai Fung Holdings Limited's (HKG:1125) CEO Compensation Package

Shareholders will probably not be too impressed with the underwhelming results at Lai Fung Holdings Limited (HKG:1125) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 16 December 2022. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

Our analysis indicates that 1125 is potentially overvalued!

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

Our data indicates that Lai Fung Holdings Limited has a market capitalization of HK$1.1b, and total annual CEO compensation was reported as HK$1.7m for the year to July 2022. That's a modest increase of 4.7% on the prior year. We note that the salary portion, which stands at HK$1.67m 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 HK$2.1m. So it looks like Lai Fung Holdings compensates Lester Lam in line with the median for the industry.

Component	2022	2021	Proportion (2022)
Salary	HK$1.7m	HK$1.6m	99%
Other	HK$18k	HK$18k	1%
Total Compensation	HK$1.7m	HK$1.6m	100%

Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% 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 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 Lai Fung Holdings Limited's Growth Numbers

Lai Fung Holdings Limited has reduced its earnings per share by 32% a year over the last three years. It saw its revenue drop 21% over the last year.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 Lai Fung Holdings Limited Been A Good Investment?

With a total shareholder return of -66% 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. 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.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 3 warning signs for Lai Fung Holdings that investors should look into moving forward.

Switching gears from Lai Fung 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.