Why Uzma Berhad's (KLSE:UZMA) CEO Pay Matters

Kamarul Bin Muhamed became the CEO of Uzma Berhad (KLSE:UZMA) in 2000, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Uzma Berhad

How Does Total Compensation For Kamarul Bin Muhamed Compare With Other Companies In The Industry?

Our data indicates that Uzma Berhad has a market capitalization of RM190m, and total annual CEO compensation was reported as RM1.3m for the year to June 2020. That's a fairly small increase of 3.3% over the previous year. In particular, the salary of RM1.07m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below RM814m, reported a median total CEO compensation of RM1.4m. This suggests that Uzma Berhad remunerates its CEO largely in line with the industry average.

Speaking on an industry level, nearly 82% of total compensation represents salary, while the remainder of 18% is other remuneration. Although there is a difference in how total compensation is set, Uzma Berhad more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Uzma Berhad's Growth

Uzma Berhad has reduced its earnings per share by 46% a year over the last three years. In the last year, its revenue is up 5.1%.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. 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 Uzma Berhad Been A Good Investment?

Given the total shareholder loss of 56% over three years, many shareholders in Uzma Berhad are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

As we touched on above, Uzma Berhad is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. We'd stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.

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. In our study, we found 3 warning signs for Uzma Berhad you should be aware of, and 1 of them makes us a bit uncomfortable.

Important note: Uzma 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. 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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