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Is Herald Holdings Limited (HKG:114) Excessively Paying Its CEO?

Simply Wall St

In 2015 Kam-Hung Shum was appointed CEO of Herald Holdings Limited (HKG:114). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for Herald Holdings

How Does Kam-Hung Shum's Compensation Compare With Similar Sized Companies?

Our data indicates that Herald Holdings Limited is worth HK$369m, and total annual CEO compensation was reported as HK$2.8m for the year to March 2019. While we always look at total compensation first, we note that the salary component is less, at HK$2.5m. We looked at a group of companies with market capitalizations under HK$1.6b, and the median CEO total compensation was HK$1.7m.

It would therefore appear that Herald Holdings Limited pays Kam-Hung Shum more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see, below, how CEO compensation at Herald Holdings has changed over time.

SEHK:114 CEO Compensation, November 11th 2019

Is Herald Holdings Limited Growing?

Over the last three years Herald Holdings Limited has shrunk its earnings per share by an average of 102% per year (measured with a line of best fit). In the last year, its revenue is down 25%.

Unfortunately, earnings per share have trended lower over the last three years. This is compounded by the fact revenue is actually down on last year. 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 might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Herald Holdings Limited Been A Good Investment?

Given the total loss of 33% over three years, many shareholders in Herald Holdings Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We examined the amount Herald Holdings Limited pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us. Arguably worse, investors are without a positive return for the last three years. In our opinion the CEO might be paid too generously! If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Herald Holdings.

Important note: Herald 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.