Increases to Hong Leong Asia Ltd.'s (SGX:H22) CEO Compensation Might Cool off for now

Key Insights

• Hong Leong Asia to hold its Annual General Meeting on 25th of April
• Total pay for CEO Stephen Ho includes S$595.6k salary
• Total compensation is 748% above industry average
• Hong Leong Asia's three-year loss to shareholders was 31% while its EPS grew by 13% over the past three years

Shareholders of Hong Leong Asia Ltd. (SGX:H22) will have been dismayed by the negative share price return over the last three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 25th of April. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Hong Leong Asia

Comparing Hong Leong Asia Ltd.'s CEO Compensation With The Industry

Our data indicates that Hong Leong Asia Ltd. has a market capitalization of S$449m, and total annual CEO compensation was reported as S$1.3m for the year to December 2023. That is, the compensation was roughly the same as last year. While we always look at total compensation first, our analysis shows that the salary component is less, at S$596k.

On examining similar-sized companies in the Singaporean Machinery industry with market capitalizations between S$272m and S$1.1b, we discovered that the median CEO total compensation of that group was S$150k. This suggests that Stephen Ho is paid more than the median for the industry.

Component	2023	2022	Proportion (2023)
Salary	S$596k	S$577k	47%
Other	S$674k	S$706k	53%
Total Compensation	S$1.3m	S$1.3m	100%

Talking in terms of the industry, salary represented approximately 85% of total compensation out of all the companies we analyzed, while other remuneration made up 15% of the pie. In Hong Leong Asia's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Hong Leong Asia Ltd.'s Growth Numbers

Hong Leong Asia Ltd. has seen its earnings per share (EPS) increase by 13% a year over the past three years. It achieved revenue growth of 5.2% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Hong Leong Asia Ltd. Been A Good Investment?

The return of -31% over three years would not have pleased Hong Leong Asia Ltd. shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Hong Leong Asia that investors should think about before committing capital to this stock.

Important note: Hong Leong Asia 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. 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.