U.S. Markets close in 39 mins

How Should Investors React To Fairwood Holdings Limited's (HKG:52) CEO Pay?

Simply Wall St

Chee Chan has been the CEO of Fairwood Holdings Limited (HKG:52) since 2009. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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 Fairwood Holdings

How Does Chee Chan's Compensation Compare With Similar Sized Companies?

According to our data, Fairwood Holdings Limited has a market capitalization of HK$3.2b, and pays its CEO total annual compensation worth HK$19m. (This number is for the twelve months until March 2019). We note that's an increase of 176% above last year. While we always look at total compensation first, we note that the salary component is less, at HK$2.6m. When we examined a selection of companies with market caps ranging from HK$1.6b to HK$6.3b, we found the median CEO total compensation was HK$2.3m.

Thus we can conclude that Chee Chan receives more in total compensation than the median of a group of companies in the same market, and of similar size to Fairwood Holdings Limited. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

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

SEHK:52 CEO Compensation, August 21st 2019

Is Fairwood Holdings Limited Growing?

On average over the last three years, Fairwood Holdings Limited has shrunk earnings per share by 2.2% each year (measured with a line of best fit). Its revenue is up 4.6% over last year.

Unfortunately there is a complete lack of earnings per share improvement, over three years. The modest increase in revenue in the last year isn't enough to make me overlook the disappointing change in earnings per share. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Shareholders might be interested in this free visualization of analyst forecasts.

Has Fairwood Holdings Limited Been A Good Investment?

Since shareholders would have lost about 29% over three years, some Fairwood Holdings Limited shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We compared the total CEO remuneration paid by Fairwood 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.

Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.

Just as bad, share price gains for investors have failed to materialize, over the same period. Notably, the CEO remuneration is actually up on last year. In our opinion the CEO might be paid too generously! So you may want to check if insiders are buying Fairwood Holdings shares with their own money (free access).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.