Key Insights

• Tak Lee Machinery Holdings' Annual General Meeting to take place on 26th of November
• Salary of HK$2.64m is part of CEO Luen Fat Chow's total remuneration
• Total compensation is 44% above industry average
• Tak Lee Machinery Holdings' three-year loss to shareholders was 51% while its EPS was down 49% over the past three years

Shareholders will probably not be too impressed with the underwhelming results at Tak Lee Machinery Holdings Limited (HKG:2102) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 26th of November. 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 Luen Fat Chow Compare With Other Companies In The Industry?

According to our data, Tak Lee Machinery Holdings Limited has a market capitalization of HK$140m, and paid its CEO total annual compensation worth HK$3.1m over the year to July 2024. This was the same amount the CEO received in the prior year. Notably, the salary which is HK$2.64m, represents most of the total compensation being paid.

On comparing similar-sized companies in the Hong Kong Trade Distributors industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$2.2m. This suggests that Luen Fat Chow is paid more than the median for the industry.

Talking in terms of the industry, salary represented approximately 93% of total compensation out of all the companies we analyzed, while other remuneration made up 7% of the pie. Although there is a difference in how total compensation is set, Tak Lee Machinery Holdings more or less reflects the market in terms of setting the salary. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Tak Lee Machinery Holdings Limited's Growth

Over the last three years, Tak Lee Machinery Holdings Limited has shrunk its earnings per share by 49% per year. In the last year, its revenue is up 2.7%.

Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Tak Lee Machinery Holdings Limited Been A Good Investment?

With a total shareholder return of -51% over three years, Tak Lee Machinery Holdings Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. 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.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 3 warning signs (and 1 which doesn't sit too well with us) in Tak Lee Machinery Holdings we think you should know about.

Important note: Tak Lee Machinery 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.