Shareholders May Not Be So Generous With Tern Properties Company Limited's (HKG:277) CEO Compensation And Here's Why

The underwhelming share price performance of Tern Properties Company Limited (HKG:277) in the past three years would have disappointed many shareholders. Per share earnings growth is also poor, despite revenues growing. The AGM coming up on 18 August 2021 will be an opportunity for shareholders to have their concerns addressed by the board and for them to exercise their influence on management through voting on resolutions such as executive remuneration. Here's why we think shareholders should hold off on a raise for the CEO at the moment.

See our latest analysis for Tern Properties

How Does Total Compensation For Hoi Sow Chan Compare With Other Companies In The Industry?

According to our data, Tern Properties Company Limited has a market capitalization of HK$951m, and paid its CEO total annual compensation worth HK$9.0m over the year to March 2021. This means that the compensation hasn't changed much from last year. Notably, the salary of HK$9.0m is the entirety of the CEO compensation.

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$2.0m. Accordingly, our analysis reveals that Tern Properties Company Limited pays Hoi Sow Chan north of the industry median. Furthermore, Hoi Sow Chan directly owns HK$112m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	HK$9.0m	HK$9.0m	100%
Other	-	-	-
Total Compensation	HK$9.0m	HK$9.0m	100%

On an industry level, roughly 69% of total compensation represents salary and 31% is other remuneration. At the company level, Tern Properties pays Hoi Sow Chan solely through a salary, preferring to go down a conventional route. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Tern Properties Company Limited's Growth Numbers

Over the last three years, Tern Properties Company Limited has shrunk its earnings per share by 79% per year. Its revenue is up 141% over the last year.

Investors would be a bit wary of companies that have lower EPS But on the other hand, revenue growth is strong, suggesting a brighter future. It's hard to reach a conclusion about business performance right now. This may be one to watch. 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 Tern Properties Company Limited Been A Good Investment?

With a three year total loss of 16% for the shareholders, Tern Properties Company Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Tern Properties rewards its CEO solely through a salary, ignoring non-salary benefits completely. The returns to shareholders is disappointing along with lack of earnings growth, which goes some way in explaining the poor returns. In the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan is in line with their expectations.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for Tern Properties that investors should think about before committing capital to this stock.

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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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.
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