Is Hotel Royal Limited (SGX:H12) Overpaying Its CEO?

Chou Lee is the CEO of Hotel Royal Limited (SGX:H12). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for Hotel Royal

How Does Chou Lee’s Compensation Compare With Similar Sized Companies?

Our data indicates that Hotel Royal Limited is worth S$304m, and total annual CEO compensation was reported as S$454k for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at S$344k. We examined companies with market caps from S$138m to S$551m, and discovered that the median CEO total compensation of that group was S$823k.

A first glance this seems like a real positive for shareholders, since Chou Lee is paid less than the average total compensation paid by similar sized companies. While this is a good thing, you’ll need to understand the business better before you can form an opinion. Although we don’t have analyst forecasts you might want to assess this data-rich visualization of earnings, revenue and cash flow.

You can see, below, how CEO compensation at Hotel Royal has changed over time.

SGX:H12 CEO Compensation, September 25th 2019
SGX:H12 CEO Compensation, September 25th 2019

Is Hotel Royal Limited Growing?

On average over the last three years, Hotel Royal Limited has shrunk earnings per share by 2.7% each year (measured with a line of best fit). Its revenue is down 7.2% over last year.

Unfortunately there is a complete lack of earnings per share improvement, over three years. 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.

Has Hotel Royal Limited Been A Good Investment?

With a three year total loss of 14%, Hotel Royal Limited would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

It looks like Hotel Royal Limited pays its CEO less than similar sized companies.

Chou Lee is paid less than CEOs of similar size companies, but the company isn’t growing and total shareholder returns have been disappointing. While one could argue it is appropriate for the CEO to be paid less than other CEOs of similar sized companies, given company performance, we would not call the pay overly generous. Whatever your view on compensation, you might want to check if insiders are buying or selling Hotel Royal shares (free trial).

Important note: Hotel Royal may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.