We Think Shareholders Are Less Likely To Approve A Pay Rise For ITE (Holdings) Limited's (HKG:8092) CEO For Now

In the past three years, the share price of ITE (Holdings) Limited (HKG:8092) has struggled to generate growth for its shareholders. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 06 August 2021. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for ITE (Holdings)

Comparing ITE (Holdings) Limited's CEO Compensation With the industry

Our data indicates that ITE (Holdings) Limited has a market capitalization of HK$49m, and total annual CEO compensation was reported as HK$1.9m for the year to March 2021. That's mostly flat as compared to the prior year's compensation. In particular, the salary of HK$1.69m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$1.8m. So it looks like ITE (Holdings) compensates Vincent Lau in line with the median for the industry.

Component	2021	2020	Proportion (2021)
Salary	HK$1.7m	HK$1.7m	88%
Other	HK$220k	HK$274k	12%
Total Compensation	HK$1.9m	HK$1.9m	100%

On an industry level, roughly 69% of total compensation represents salary and 31% is other remuneration. According to our research, ITE (Holdings) has allocated a higher percentage of pay to salary in comparison to the wider industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at ITE (Holdings) Limited's Growth Numbers

ITE (Holdings) Limited has seen its earnings per share (EPS) increase by 86% a year over the past three years. In the last year, its revenue is up 12%.

This demonstrates that the company has been improving recently and is good news for the shareholders. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has ITE (Holdings) Limited Been A Good Investment?

Given the total shareholder loss of 5.4% over three years, many shareholders in ITE (Holdings) Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. The upcoming AGM will be a chance for shareholders 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.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 3 warning signs for ITE (Holdings) (of which 1 is a bit concerning!) that you should know about in order to have a holistic understanding of the 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. 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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