We Discuss Why FIT Hon Teng Limited's (HKG:6088) CEO Compensation May Be Closely Reviewed

FIT Hon Teng Limited (HKG:6088) has not performed well recently and CEO Sidney Lu Lu will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 25 June 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Check out our latest analysis for FIT Hon Teng

Comparing FIT Hon Teng Limited's CEO Compensation With the industry

According to our data, FIT Hon Teng Limited has a market capitalization of HK$14b, and paid its CEO total annual compensation worth US$7.9m over the year to December 2020. That's a notable decrease of 39% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$3.5m.

For comparison, other companies in the same industry with market capitalizations ranging between HK$7.8b and HK$25b had a median total CEO compensation of US$252k. Accordingly, our analysis reveals that FIT Hon Teng Limited pays Sidney Lu Lu north of the industry median. What's more, Sidney Lu Lu holds HK$456m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	US$3.5m	US$3.5m	44%
Other	US$4.4m	US$9.5m	56%
Total Compensation	US$7.9m	US$13m	100%

Speaking on an industry level, nearly 77% of total compensation represents salary, while the remainder of 23% is other remuneration. FIT Hon Teng pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at FIT Hon Teng Limited's Growth Numbers

Over the last three years, FIT Hon Teng Limited has shrunk its earnings per share by 40% per year. It saw its revenue drop 1.3% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has FIT Hon Teng Limited Been A Good Investment?

The return of -39% over three years would not have pleased FIT Hon Teng Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 4 warning signs for FIT Hon Teng (of which 1 is significant!) 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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