How Should Investors React To Karyon Industries Berhad's (KLSE:KARYON) CEO Pay?

Ling Chua became the CEO of Karyon Industries Berhad (KLSE:KARYON) in 2016, 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 Karyon Industries Berhad.

View our latest analysis for Karyon Industries Berhad

How Does Total Compensation For Ling Chua Compare With Other Companies In The Industry?

According to our data, Karyon Industries Berhad has a market capitalization of RM95m, and paid its CEO total annual compensation worth RM1.1m over the year to March 2020. Notably, that's an increase of 13% over the year before. We note that the salary portion, which stands at RM553.6k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below RM809m, we found that the median total CEO compensation was RM763k. Hence, we can conclude that Ling Chua is remunerated higher than the industry median. Furthermore, Ling Chua directly owns RM3.2m worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, roughly 59% of total compensation represents salary and 41% is other remuneration. Karyon Industries Berhad pays a modest slice of remuneration through salary, as compared to the broader industry. 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 Karyon Industries Berhad's Growth Numbers

Karyon Industries Berhad has reduced its earnings per share by 11% a year over the last three years. In the last year, its revenue is down 12%.

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. 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 Karyon Industries Berhad Been A Good Investment?

Karyon Industries Berhad has not done too badly by shareholders, with a total return of 2.3%, over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

As previously discussed, Ling 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 great when you realize that the company has been suffering from negative EPS growth for the last three years. While shareholder returns are acceptable, they don't delight. So we think more research is needed, but we don't think the CEO is underpaid.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for Karyon Industries Berhad that you should be aware of before investing.

Important note: Karyon Industries 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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