Shareholders May Not Be So Generous With Sparkle Roll Group Limited's (HKG:970) CEO Compensation And Here's Why

In the past three years, the share price of Sparkle Roll Group Limited (HKG:970) has struggled to grow and now shareholders are sitting on a loss. In addition, the company's per-share earnings growth is not looking good, despite growing revenues. Shareholders will have a chance to take their concerns to the board at the next AGM on 21 September 2021 and vote on resolutions including executive compensation, which studies show may have an impact on company performance. We think shareholders may be cautious of approving a pay rise for the CEO at the moment, based on our analysis below.

Check out our latest analysis for Sparkle Roll Group

Comparing Sparkle Roll Group Limited's CEO Compensation With the industry

At the time of writing, our data shows that Sparkle Roll Group Limited has a market capitalization of HK$930m, and reported total annual CEO compensation of HK$2.1m for the year to March 2021. That is, the compensation was roughly the same as last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at HK$62k.

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. This suggests that Sparkle Roll Group remunerates its CEO largely in line with the industry average. Moreover, Hao Jiang Zheng also holds HK$1.8m 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	2021	2020	Proportion (2021)
Salary	HK$62k	HK$60k	3%
Other	HK$2.0m	HK$2.0m	97%
Total Compensation	HK$2.1m	HK$2.1m	100%

On an industry level, around 94% of total compensation represents salary and 6% is other remuneration. A high-salary is usually a no-brainer when it comes to attracting the best executives, but Sparkle Roll Group paid Hao Jiang Zheng a nominal salary to the CEO over the past 12 months, instead focusing on non-salary compensation. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked 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 63% per year. In the last year, its revenue is up 31%.

The reduction in EPS, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. 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?

The return of -50% over three years would not have pleased Sparkle Roll Group Limited shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Sparkle Roll Group prefers rewarding its CEO through non-salary benefits. The loss to shareholders over the past three years is certainly concerning and possibly has something to do with the fact that the company's earnings haven't grown. Shareholders will get the chance at the upcoming AGM to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

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. We did our research and spotted 3 warning signs for Sparkle Roll Group that investors should look into moving forward.

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.

When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.