Here's Why Shareholders May Want To Be Cautious With Increasing Hap Seng Consolidated Berhad's (KLSE:HAPSENG) CEO Pay Packet

Key Insights

• Hap Seng Consolidated Berhad to hold its Annual General Meeting on 29th of May
• Salary of RM2.36m is part of CEO Edward Lee's total remuneration
• The overall pay is 32% above the industry average
• Over the past three years, Hap Seng Consolidated Berhad's EPS grew by 2.2% and over the past three years, the total loss to shareholders 33%

In the past three years, the share price of Hap Seng Consolidated Berhad (KLSE:HAPSENG) has struggled to grow and now shareholders are sitting on a loss. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. These are some of the concerns that shareholders may want to bring up at the next AGM held on 29th of May. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

Check out our latest analysis for Hap Seng Consolidated Berhad

How Does Total Compensation For Edward Lee Compare With Other Companies In The Industry?

According to our data, Hap Seng Consolidated Berhad has a market capitalization of RM11b, and paid its CEO total annual compensation worth RM4.1m over the year to December 2023. That's just a smallish increase of 5.3% on last year. We note that the salary of RM2.36m makes up a sizeable portion of the total compensation received by the CEO.

On examining similar-sized companies in the Malaysia Industrials industry with market capitalizations between RM9.4b and RM30b, we discovered that the median CEO total compensation of that group was RM3.1m. This suggests that Edward Lee is paid more than the median for the industry.

Component	2023	2022	Proportion (2023)
Salary	RM2.4m	RM2.2m	57%
Other	RM1.8m	RM1.7m	43%
Total Compensation	RM4.1m	RM3.9m	100%

On an industry level, around 57% of total compensation represents salary and 43% is other remuneration. There isn't a significant difference between Hap Seng Consolidated Berhad and the broader market, in terms of salary allocation in the overall compensation package. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Hap Seng Consolidated Berhad's Growth

Over the past three years, Hap Seng Consolidated Berhad has seen its earnings per share (EPS) grow by 2.2% per year. It saw its revenue drop 14% over the last year.

We generally like to see a little revenue growth, but the modest improvement in EPS is good. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is 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 Hap Seng Consolidated Berhad Been A Good Investment?

Few Hap Seng Consolidated Berhad shareholders would feel satisfied with the return of -33% over three years. This suggests it would be unwise for the company to pay the CEO too 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 stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 3 warning signs (and 1 which makes us a bit uncomfortable) in Hap Seng Consolidated Berhad we think you should know about.

Important note: Hap Seng Consolidated Berhad 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. 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.