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Is In Construction Holdings Limited's (HKG:1500) CEO Pay Justified?

Simply Wall St

Pak Man Lau is the CEO of In Construction Holdings Limited (HKG:1500). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for In Construction Holdings

How Does Pak Man Lau's Compensation Compare With Similar Sized Companies?

According to our data, In Construction Holdings Limited has a market capitalization of HK$100m, and paid its CEO total annual compensation worth HK$1.5m over the year to March 2019. Notably, the salary of HK$1.5m is the vast majority of the CEO compensation. We examined a group of similar sized companies, with market capitalizations of below HK$1.6b. The median CEO total compensation in that group is HK$1.8m.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where In Construction Holdings stands. On a sector level, around 90% of total compensation represents salary and 9.9% is other remuneration. In Construction Holdings pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay.

So Pak Man Lau receives a similar amount to the median CEO pay, amongst the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. You can see a visual representation of the CEO compensation at In Construction Holdings, below.

SEHK:1500 CEO Compensation April 28th 2020

Is In Construction Holdings Limited Growing?

On average over the last three years, In Construction Holdings Limited has shrunk earnings per share by 89% each year (measured with a line of best fit). It achieved revenue growth of 13% over the last year.

Unfortunately, earnings per share have trended lower over the last three years. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for me to put aside my concerns around earnings. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has In Construction Holdings Limited Been A Good Investment?

Since shareholders would have lost about 81% over three years, some In Construction Holdings Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Pak Man Lau is paid around what is normal for the leaders of comparable size companies.

After looking at EPS and total shareholder returns, it's certainly hard to argue the company has performed well, since both metrics are down. Most would consider it prudent for the company to hold off any CEO pay rise until performance improves. On another note, In Construction Holdings has 4 warning signs (and 2 which are concerning) we think you should know about.

Important note: In Construction Holdings 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.

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.

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