Here's Why Shareholders May Want To Be Cautious With Increasing Kumpulan H & L High-Tech Berhad's (KLSE:HIGHTEC) CEO Pay Packet

Kumpulan H & L High-Tech Berhad (KLSE:HIGHTEC) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 28 April 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Check out our latest analysis for Kumpulan H & L High-Tech Berhad

How Does Total Compensation For Lye Tan Compare With Other Companies In The Industry?

According to our data, Kumpulan H & L High-Tech Berhad has a market capitalization of RM75m, and paid its CEO total annual compensation worth RM834k over the year to October 2020. We note that's a small decrease of 5.1% on last year. We note that the salary portion, which stands at RM672.0k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below RM823m, we found that the median total CEO compensation was RM351k. Accordingly, our analysis reveals that Kumpulan H & L High-Tech Berhad pays Lye Tan north of the industry median. What's more, Lye Tan holds RM7.8m 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	RM672k	RM616k	81%
Other	RM162k	RM263k	19%
Total Compensation	RM834k	RM879k	100%

On an industry level, around 72% of total compensation represents salary and 28% is other remuneration. According to our research, Kumpulan H & L High-Tech Berhad 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 Kumpulan H & L High-Tech Berhad's Growth Numbers

Kumpulan H & L High-Tech Berhad has reduced its earnings per share by 12% a year over the last three years. Its revenue is down 16% over the previous year.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Kumpulan H & L High-Tech Berhad Been A Good Investment?

We think that the total shareholder return of 75%, over three years, would leave most Kumpulan H & L High-Tech Berhad shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

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 6 warning signs for Kumpulan H & L High-Tech Berhad (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.

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.

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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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