Hoi Sow Chan became the CEO of Tern Properties Company Limited (HKG:277) in 1987, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Tern Properties pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing Tern Properties Company Limited's CEO Compensation With the industry
At the time of writing, our data shows that Tern Properties Company Limited has a market capitalization of HK$1.0b, and reported total annual CEO compensation of HK$9.0m for the year to March 2020. That's mostly flat as compared to the prior year's compensation. Notably, the salary of HK$9.0m is the entirety of the CEO compensation.
For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$1.7m. Hence, we can conclude that Hoi Sow Chan is remunerated higher than the industry median. Moreover, Hoi Sow Chan also holds HK$119m worth of Tern Properties stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 71% of total compensation out of all the companies we analyzed, while other remuneration made up 29% of the pie. On a company level, Tern Properties prefers to reward its CEO through a salary, opting not to pay Hoi Sow Chan through 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 Tern Properties Company Limited's Growth Numbers
Tern Properties Company Limited has reduced its earnings per share by 104% a year over the last three years. In the last year, its revenue is down 74%.
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 Tern Properties Company Limited Been A Good Investment?
With a three year total loss of 25% for the shareholders, Tern Properties Company Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.
Tern Properties pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. As we noted earlier, Tern Properties pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. To make matters worse, EPS growth has also been negative during this period. Considering such poor performance, we think shareholders might be concerned if the CEO's compensation were to grow.
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. In our study, we found 3 warning signs for Tern Properties you should be aware of, and 1 of them is potentially serious.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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This article by Simply Wall St is general in nature. 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.
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