We Discuss Why Pestech International Berhad's (KLSE:PESTECH) CEO Compensation May Be Closely Reviewed

The results at Pestech International Berhad (KLSE:PESTECH) have been quite disappointing recently and CEO Paul Lim bears some responsibility for this. At the upcoming AGM on 25 November 2022, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Our analysis indicates that PESTECH is potentially overvalued!

How Does Total Compensation For Paul Lim Compare With Other Companies In The Industry?

At the time of writing, our data shows that Pestech International Berhad has a market capitalization of RM290m, and reported total annual CEO compensation of RM1.4m for the year to June 2022. That's a notable decrease of 10% on last year. We note that the salary portion, which stands at RM1.41m constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations under RM910m, the reported median total CEO compensation was RM696k. This suggests that Paul Lim is paid more than the median for the industry. What's more, Paul Lim holds RM56m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2022	2021	Proportion (2022)
Salary	RM1.4m	RM1.6m	97%
Other	RM36k	RM36k	3%
Total Compensation	RM1.4m	RM1.6m	100%

On an industry level, roughly 84% of total compensation represents salary and 16% is other remuneration. Pestech International Berhad has gone down a largely traditional route, paying Paul Lim a high salary, giving it preference over non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at Pestech International Berhad's Growth Numbers

Over the last three years, Pestech International Berhad has shrunk its earnings per share by 45% per year. Its revenue is down 20% 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. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Pestech International Berhad Been A Good Investment?

With a total shareholder return of -71% over three years, Pestech International Berhad shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Pestech International Berhad pays its CEO a majority of compensation through a salary. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 5 warning signs for Pestech International Berhad (of which 2 are concerning!) 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. 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.