What Can We Learn About Kwoon Chung Bus Holdings' (HKG:306) CEO Compensation?

James Wong became the CEO of Kwoon Chung Bus Holdings Limited (HKG:306) in 2014, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Kwoon Chung Bus Holdings.

Check out our latest analysis for Kwoon Chung Bus Holdings

Comparing Kwoon Chung Bus Holdings Limited's CEO Compensation With the industry

At the time of writing, our data shows that Kwoon Chung Bus Holdings Limited has a market capitalization of HK$1.0b, and reported total annual CEO compensation of HK$2.7m for the year to March 2020. That's a notable decrease of 17% on last year. We note that the salary portion, which stands at HK$2.69m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$267k. This suggests that James Wong is paid more than the median for the industry. Furthermore, James Wong directly owns HK$7.7m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 76% of total compensation out of all the companies we analyzed, while other remuneration made up 24% of the pie. Kwoon Chung Bus Holdings has gone down a largely traditional route, paying James Wong a high salary, giving it preference over non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Kwoon Chung Bus Holdings Limited's Growth

Over the last three years, Kwoon Chung Bus Holdings Limited has shrunk its earnings per share by 57% per year. In the last year, its revenue is down 47%.

The decline in EPS is a bit concerning. 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. 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 Kwoon Chung Bus Holdings Limited Been A Good Investment?

Given the total shareholder loss of 47% over three years, many shareholders in Kwoon Chung Bus 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...

Kwoon Chung Bus Holdings pays its CEO a majority of compensation through a salary. As previously discussed, James is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. This doesn't look good against shareholder returns, which have been negative for the past three years. 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 pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for Kwoon Chung Bus Holdings (1 is a bit unpleasant!) that you should be aware of before investing here.

Important note: Kwoon Chung Bus Holdings is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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