Hao Jiang Zheng became the CEO of Sparkle Roll Group Limited (HKG:970) in 2008, 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 Sparkle Roll Group pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
See our latest analysis for Sparkle Roll Group
Comparing Sparkle Roll Group Limited's CEO Compensation With the industry
Our data indicates that Sparkle Roll Group Limited has a market capitalization of HK$1.2b, and total annual CEO compensation was reported as HK$2.1m for the year to March 2020. This means that the compensation hasn't changed much from last year. While we always look at total compensation first, our analysis shows that the salary component is less, at HK$60k.
On comparing similar companies from the same industry with market caps ranging from HK$775m to HK$3.1b, we found that the median CEO total compensation was HK$1.3m. This suggests that Hao Jiang Zheng is paid more than the median for the industry. Moreover, Hao Jiang Zheng also holds HK$2.6m worth of Sparkle Roll Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | HK$60k | HK$60k | 3% |
| Other | HK$2.0m | HK$2.0m | 97% |
| Total Compensation | HK$2.1m | HK$2.1m | 100% |
Speaking on an industry level, nearly 93% of total compensation represents salary, while the remainder of 7.0% is other remuneration. Interestingly, the company has chosen to go down an unconventional route in that it pays a smaller salary to Hao Jiang Zheng as compared to non-salary compensation over the one-year period examined. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Sparkle Roll Group Limited's Growth
Over the last three years, Sparkle Roll Group Limited has shrunk its earnings per share by 33% per year. In the last year, its revenue is down 4.5%.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Sparkle Roll Group Limited Been A Good Investment?
Since shareholders would have lost about 68% over three years, some Sparkle Roll Group Limited investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.
To Conclude...
Sparkle Roll Group prefers rewarding its CEO through non-salary benefits. As we touched on above, Sparkle Roll Group Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Disappointingly, share price gains over the last three years have failed to materialize. Add to that declining EPS growth, and you have the perfect recipe for shareholder irritation. Considering such poor performance, we think shareholders might be concerned if the CEO's compensation were to grow.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 4 warning signs for Sparkle Roll Group that investors should think about before committing capital to this stock.
Switching gears from Sparkle Roll Group, 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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About SEHK:970
New Sparkle Roll International Group
An investment holding company, engages in the dealerships of luxury goods and automobiles in Hong Kong and Mainland China.
Good value with adequate balance sheet.
