Key Insights

• Chen Hsong Holdings to hold its Annual General Meeting on 26th of August
• Salary of HK$6.18m is part of CEO Lai Yuen Chiang's total remuneration
• Total compensation is 307% above industry average
• Chen Hsong Holdings' three-year loss to shareholders was 35% while its EPS was down 21% over the past three years

Shareholders will probably not be too impressed with the underwhelming results at Chen Hsong Holdings Limited (HKG:57) recently. At the upcoming AGM on 26th of August, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

Comparing Chen Hsong Holdings Limited's CEO Compensation With The Industry

Our data indicates that Chen Hsong Holdings Limited has a market capitalization of HK$908m, and total annual CEO compensation was reported as HK$8.0m for the year to March 2024. We note that's a decrease of 33% compared to last year. In particular, the salary of HK$6.18m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the Hong Kong Machinery industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$2.0m. Accordingly, our analysis reveals that Chen Hsong Holdings Limited pays Lai Yuen Chiang north of the industry median. What's more, Lai Yuen Chiang holds HK$7.2m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, around 79% of total compensation represents salary and 21% is other remuneration. There isn't a significant difference between Chen Hsong Holdings and the broader market, in terms of salary allocation in the overall compensation package. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Chen Hsong Holdings Limited's Growth Numbers

Over the last three years, Chen Hsong Holdings Limited has shrunk its earnings per share by 21% per year. In the last year, its revenue is down 13%.

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. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Chen Hsong Holdings Limited Been A Good Investment?

The return of -35% over three years would not have pleased Chen Hsong Holdings Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Chen Hsong Holdings that you should be aware of before investing.

Switching gears from Chen Hsong 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.