Why We Think Sunfonda Group Holdings Limited's (HKG:1771) CEO Compensation Is Not Excessive At All

Performance at Sunfonda Group Holdings Limited (HKG:1771) has been rather uninspiring recently and shareholders may be wondering how CEO Man Chiu plans to fix this. At the next AGM coming up on 25 May 2021, they can influence managerial decision making through voting on resolutions, including executive remuneration. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. In our opinion, CEO compensation does not look excessive and we discuss why.

See our latest analysis for Sunfonda Group Holdings

How Does Total Compensation For Man Chiu Compare With Other Companies In The Industry?

According to our data, Sunfonda Group Holdings Limited has a market capitalization of HK$1.2b, and paid its CEO total annual compensation worth CN¥810k over the year to December 2020. This was the same amount the CEO received in the prior year. We note that the salary portion, which stands at CN¥800.0k constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations ranging from HK$777m to HK$3.1b, the reported median CEO total compensation was CN¥2.4m. In other words, Sunfonda Group Holdings pays its CEO lower than the industry median.

Component	2020	2019	Proportion (2020)
Salary	CN¥800k	CN¥800k	99%
Other	CN¥10k	CN¥10k	1%
Total Compensation	CN¥810k	CN¥810k	100%

On an industry level, roughly 91% of total compensation represents salary and 9% is other remuneration. Investors will find it interesting that Sunfonda Group Holdings pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Sunfonda Group Holdings Limited's Growth

Sunfonda Group Holdings Limited saw earnings per share stay pretty flat over the last three years. It achieved revenue growth of 14% over the last year.

The lack of EPS growth is certainly uninspiring. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Sunfonda Group Holdings Limited Been A Good Investment?

Boasting a total shareholder return of 87% over three years, Sunfonda Group Holdings Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Sunfonda Group Holdings pays its CEO a majority of compensation through a salary. While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us wonder if these strong returns can continue. Shareholders might want to question the board about these concerns, and revisit their investment thesis for the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 3 warning signs for Sunfonda Group Holdings that you should be aware of before investing.

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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