Asia Orient Holdings Limited's (HKG:214) CEO Compensation Is Looking A Bit Stretched At The Moment

Simply Wall St
August 20, 2021
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Shareholders of Asia Orient Holdings Limited (HKG:214) will have been dismayed by the negative share price return over the last three years. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. The AGM coming up on the 27 August 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Asia Orient Holdings

How Does Total Compensation For Richard Poon Compare With Other Companies In The Industry?

At the time of writing, our data shows that Asia Orient Holdings Limited has a market capitalization of HK$967m, and reported total annual CEO compensation of HK$32m for the year to March 2021. That's just a smallish increase of 4.1% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at HK$1.3m.

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$1.9m. Accordingly, our analysis reveals that Asia Orient Holdings Limited pays Richard Poon north of the industry median. Furthermore, Richard Poon directly owns HK$586m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20212020Proportion (2021)
Salary HK$1.3m HK$1.3m 4%
Other HK$31m HK$30m 96%
Total CompensationHK$32m HK$31m100%

Talking in terms of the industry, salary represented approximately 70% of total compensation out of all the companies we analyzed, while other remuneration made up 30% of the pie. Asia Orient Holdings has chosen to walk a path less trodden, opting to compensate its CEO with less of a traditional salary and more non-salary rewards over the last year. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

SEHK:214 CEO Compensation August 20th 2021

A Look at Asia Orient Holdings Limited's Growth Numbers

Over the past three years, Asia Orient Holdings Limited has seen its earnings per share (EPS) grow by 7.3% per year. It achieved revenue growth of 4.1% over the last year.

We would argue that the improvement in revenue is good, but isn't particularly impressive, but the modest improvement in EPS is good. Considering these factors we'd say performance has been pretty decent, though not amazing. 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 Asia Orient Holdings Limited Been A Good Investment?

Since shareholders would have lost about 30% over three years, some Asia Orient Holdings Limited investors would surely be feeling negative emotions. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Asia Orient Holdings prefers rewarding its CEO through non-salary benefits. The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 4 warning signs (and 2 which can't be ignored) in Asia Orient Holdings we think you should know about.

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.

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