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Is Hop Fung Group Holdings Limited (HKG:2320) Overpaying Its CEO?

Simply Wall St

Sum Tai Hui is the CEO of Hop Fung Group Holdings Limited (HKG:2320). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for Hop Fung Group Holdings

How Does Sum Tai Hui's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Hop Fung Group Holdings Limited has a market cap of HK$364m, and is paying total annual CEO compensation of HK$6.6m. (This figure is for the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at HK$6.1m. We took a group of companies with market capitalizations below HK$1.6b, and calculated the median CEO total compensation to be HK$1.9m.

It would therefore appear that Hop Fung Group Holdings Limited pays Sum Tai Hui 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.

The graphic below shows how CEO compensation at Hop Fung Group Holdings has changed from year to year.

SEHK:2320 CEO Compensation, September 17th 2019

Is Hop Fung Group Holdings Limited Growing?

On average over the last three years, Hop Fung Group Holdings Limited has shrunk earnings per share by 22% each year (measured with a line of best fit). In the last year, its revenue is down -6.3%.

Unfortunately, earnings per share have trended lower over the last three years. And the impression is worse when you consider revenue is down year-on-year. 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 might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Hop Fung Group Holdings Limited Been A Good Investment?

Given the total loss of 16% over three years, many shareholders in Hop Fung Group Holdings Limited are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared the total CEO remuneration paid by Hop Fung Group Holdings Limited, and compared it to remuneration at a group of 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.

Over the same period, investors would have come away with nothing in the way of share price gains. In our opinion the CEO might be paid too generously! Whatever your view on compensation, you might want to check if insiders are buying or selling Hop Fung Group Holdings shares (free trial).

Important note: Hop Fung Group 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.