Stock Analysis

We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Tai Cheung Holdings Limited's (HKG:88) CEO For Now

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Shareholders of Tai Cheung Holdings Limited (HKG:88) will have been dismayed by the negative share price return over the last three years. Per share earnings growth is also lacking, despite revenue growth. Shareholders will have a chance to take their concerns to the board at the next AGM on 26 August 2021 and vote on resolutions including executive compensation, which studies show may have an impact on company performance. Here's why we think shareholders should hold off on a raise for the CEO at the moment.

Check out our latest analysis for Tai Cheung Holdings

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

At the time of writing, our data shows that Tai Cheung Holdings Limited has a market capitalization of HK$3.4b, and reported total annual CEO compensation of HK$4.4m for the year to March 2021. This was the same as last year. We note that the salary portion, which stands at HK$3.41m constitutes the majority of total compensation received by the CEO.

On examining similar-sized companies in the industry with market capitalizations between HK$1.6b and HK$6.2b, we discovered that the median CEO total compensation of that group was HK$2.9m. Accordingly, our analysis reveals that Tai Cheung Holdings Limited pays David Chan north of the industry median. Furthermore, David Chan directly owns HK$1.5b worth of shares in the company, implying that they are deeply invested in the company's success.

Component20212020Proportion (2021)
Salary HK$3.4m HK$3.4m 77%
Other HK$1.0m HK$1.0m 23%
Total CompensationHK$4.4m HK$4.4m100%

Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. According to our research, Tai Cheung Holdings has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

SEHK:88 CEO Compensation August 19th 2021

A Look at Tai Cheung Holdings Limited's Growth Numbers

Tai Cheung Holdings Limited has reduced its earnings per share by 74% a year over the last three years. Its revenue is up 72% over the last year.

The reduction in EPS, over three years, is arguably concerning. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Tai Cheung Holdings Limited Been A Good Investment?

Given the total shareholder loss of 25% over three years, many shareholders in Tai Cheung Holdings Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

The returns to shareholders is disappointing along with lack of earnings growth, which goes some way in explaining the poor returns. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Tai Cheung Holdings that investors should think about before committing capital to this stock.

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. 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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