Increases to Lum Chang Holdings Limited's (SGX:L19) CEO Compensation Might Cool off for now

Key Insights

• Lum Chang Holdings' Annual General Meeting to take place on 27th of October
• Salary of S$708.9k is part of CEO David Lum's total remuneration
• The overall pay is 46% above the industry average
• Over the past three years, Lum Chang Holdings' EPS fell by 75% and over the past three years, the total shareholder return was 15%

Despite Lum Chang Holdings Limited's (SGX:L19) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. The upcoming AGM on 27th of October may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

See our latest analysis for Lum Chang Holdings

Comparing Lum Chang Holdings Limited's CEO Compensation With The Industry

Our data indicates that Lum Chang Holdings Limited has a market capitalization of S$113m, and total annual CEO compensation was reported as S$824k for the year to June 2023. That's a slight decrease of 4.6% on the prior year. Notably, the salary which is S$708.9k, represents most of the total compensation being paid.

In comparison with other companies in the Singapore Construction industry with market capitalizations under S$274m, the reported median total CEO compensation was S$566k. This suggests that David Lum is paid more than the median for the industry. Moreover, David Lum also holds S$6.6m worth of Lum Chang Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	S$709k	S$752k	86%
Other	S$115k	S$112k	14%
Total Compensation	S$824k	S$865k	100%

On an industry level, roughly 86% of total compensation represents salary and 14% is other remuneration. Our data reveals that Lum Chang Holdings allocates salary more or less in line with the wider market. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Lum Chang Holdings Limited's Growth

Over the last three years, Lum Chang Holdings Limited has shrunk its earnings per share by 75% per year. Its revenue is down 5.6% 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. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Lum Chang Holdings Limited Been A Good Investment?

Lum Chang Holdings Limited has served shareholders reasonably well, with a total return of 15% over three years. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 3 warning signs for Lum Chang Holdings (1 doesn't sit too well with us!) that you should be aware of before investing here.

Switching gears from Lum Chang Holdings, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.