Why Selangor Dredging Berhad's (KLSE:SDRED) CEO Pay Matters

Lip Teh became the CEO of Selangor Dredging Berhad (KLSE:SDRED) in 1998, 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 Selangor Dredging Berhad

Comparing Selangor Dredging Berhad's CEO Compensation With the industry

According to our data, Selangor Dredging Berhad has a market capitalization of RM200m, and paid its CEO total annual compensation worth RM750k over the year to March 2020. That is, the compensation was roughly the same as last year. In particular, the salary of RM716.1k, 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 RM817m, reported a median total CEO compensation of RM797k. From this we gather that Lip Teh is paid around the median for CEOs in the industry. Furthermore, Lip Teh directly owns RM42m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 83% of total compensation represents salary, while the remainder of 17% is other remuneration. Selangor Dredging Berhad pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Selangor Dredging Berhad's Growth

Over the last three years, Selangor Dredging Berhad has shrunk its earnings per share by 70% per year. It saw its revenue drop 18% over the last year.

Few shareholders would be pleased to read that EPS have declined. 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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Selangor Dredging Berhad Been A Good Investment?

Since shareholders would have lost about 40% over three years, some Selangor Dredging Berhad investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

Selangor Dredging Berhad pays its CEO a majority of compensation through a salary. As previously discussed, Lip is compensated close to the median for companies of its size, and which belong to the same industry. 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 pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 3 warning signs for Selangor Dredging Berhad you should be aware of, and 2 of them are significant.

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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