We Think Shareholders May Want To Consider A Review Of Pokfulam Development Company Limited's (HKG:225) CEO Compensation Package

By
Simply Wall St
Published
January 10, 2022
SEHK:225
Source: Shutterstock

The results at Pokfulam Development Company Limited (HKG:225) have been quite disappointing recently and CEO Abraham Wong bears some responsibility for this. At the upcoming AGM on 17 January 2022, shareholders can hear from the board including their plans for turning around performance. 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. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Pokfulam Development

How Does Total Compensation For Abraham Wong Compare With Other Companies In The Industry?

According to our data, Pokfulam Development Company Limited has a market capitalization of HK$1.3b, and paid its CEO total annual compensation worth HK$2.4m over the year to September 2021. This means that the compensation hasn't changed much from last year. Notably, the salary which is HK$2.26m, represents most of the total compensation being paid.

On examining similar-sized companies in the industry with market capitalizations between HK$780m and HK$3.1b, we discovered that the median CEO total compensation of that group was HK$2.8m. This suggests that Pokfulam Development remunerates its CEO largely in line with the industry average. What's more, Abraham Wong holds HK$954m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary HK$2.3m HK$2.3m 95%
Other HK$110k HK$110k 5%
Total CompensationHK$2.4m HK$2.4m100%

Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. Pokfulam Development is focused on going down a more traditional approach and is paying a higher portion of compensation through salary, as compared to 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.

ceo-compensation
SEHK:225 CEO Compensation January 10th 2022

Pokfulam Development Company Limited's Growth

Over the last three years, Pokfulam Development Company Limited has shrunk its earnings per share by 34% per year. In the last year, its revenue is down 7.9%.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Pokfulam Development Company Limited Been A Good Investment?

Since shareholders would have lost about 25% over three years, some Pokfulam Development Company Limited investors would surely be feeling negative emotions. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Pokfulam Development pays its CEO a majority of compensation through a salary. Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

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 2 warning signs for Pokfulam Development (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Pokfulam Development, 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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