Key Insights

• Royal Deluxe Holdings will host its Annual General Meeting on 5th of September
• Salary of HK$5.01m is part of CEO Lai Heng Chao's total remuneration
• Total compensation is 141% above industry average
• Over the past three years, Royal Deluxe Holdings' EPS fell by 36% and over the past three years, the total loss to shareholders 57%

Shareholders will probably not be too impressed with the underwhelming results at Royal Deluxe Holdings Limited (HKG:3789) recently. At the upcoming AGM on 5th of September, 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.

How Does Total Compensation For Lai Heng Chao Compare With Other Companies In The Industry?

Our data indicates that Royal Deluxe Holdings Limited has a market capitalization of HK$65m, and total annual CEO compensation was reported as HK$5.4m for the year to March 2024. That's a fairly small increase of 4.1% over the previous year. We note that the salary portion, which stands at HK$5.01m constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the Hong Kong Construction industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$2.3m. Accordingly, our analysis reveals that Royal Deluxe Holdings Limited pays Lai Heng Chao north of the industry median.

Talking in terms of the industry, salary represented approximately 84% of total compensation out of all the companies we analyzed, while other remuneration made up 16% of the pie. Although there is a difference in how total compensation is set, Royal Deluxe Holdings more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Royal Deluxe Holdings Limited's Growth

Over the last three years, Royal Deluxe Holdings Limited has shrunk its earnings per share by 36% per year. It achieved revenue growth of 12% over the last year.

Overall this is not a very positive result for shareholders. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Royal Deluxe Holdings Limited Been A Good Investment?

Few Royal Deluxe Holdings Limited shareholders would feel satisfied with the return of -57% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Royal Deluxe Holdings (of which 2 shouldn't be ignored!) that you should know about in order to have a holistic understanding of the stock.

Important note: Royal Deluxe 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.