Key Insights

• Prosperous Future Holdings' Annual General Meeting to take place on 21st of June
• Salary of HK$1.79m is part of CEO Ka Ho Lau's total remuneration
• Total compensation is similar to the industry average
• Over the past three years, Prosperous Future Holdings' EPS grew by 19% and over the past three years, the total loss to shareholders 8.2%

In the past three years, the share price of Prosperous Future Holdings Limited (HKG:1259) has struggled to generate growth for its shareholders. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 21st of June. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

How Does Total Compensation For Ka Ho Lau Compare With Other Companies In The Industry?

At the time of writing, our data shows that Prosperous Future Holdings Limited has a market capitalization of HK$172m, and reported total annual CEO compensation of HK$2.2m for the year to December 2023. We note that's a decrease of 8.6% compared to last year. In particular, the salary of HK$1.79m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the Hong Kong Personal Products industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$2.4m. So it looks like Prosperous Future Holdings compensates Ka Ho Lau in line with the median for the industry. Moreover, Ka Ho Lau also holds HK$1.4m worth of Prosperous Future Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 68% of total compensation out of all the companies we analyzed, while other remuneration made up 32% of the pie. Prosperous Future Holdings is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Prosperous Future Holdings Limited's Growth

Prosperous Future Holdings Limited's earnings per share (EPS) grew 19% per year over the last three years. Its revenue is up 3.8% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's also good to see modest revenue growth, suggesting the underlying business is healthy. 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 Prosperous Future Holdings Limited Been A Good Investment?

Given the total shareholder loss of 8.2% over three years, many shareholders in Prosperous Future Holdings Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. 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. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for Prosperous Future Holdings that you should be aware of before investing.

Important note: Prosperous Future Holdings 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com