Yahoo Finance Does Inno-Tech Holdings Limited’s (HKG:8202) CEO Pay Compare Well With Peers?
Wing Fung Ang took the reins as CEO of Inno-Tech Holdings Limited’s (SEHK:8202) and grew market cap to HK$142.52M recently. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. I will break down Ang’s pay and compare this to the company’s performance over the same period, as well as measure it against other SEHK-listed CEOs leading companies of similar size and profitability. View our latest analysis for Inno-Tech Holdings
What has been the trend in 8202’s earnings?
8202 can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. Recently, 8202 delivered negative earnings of -HK$416.32M , which is a further decline from prior year’s loss of -HK$118.43M. Moreover, on average, 8202 has been loss-making in the past, with a 5-year average EPS of -HK$132.39. During times of negative earnings, the company may be facing a period of reinvestment and growth, or it can be a signal of some headwind. In any case, CEO compensation should mirror the current state of the business. In the latest report, Ang’s total remuneration dropped by more than half of the prior year’s level, to HK$632.00K.
What’s a reasonable CEO compensation?
Though no standard benchmark exists, as remuneration should be tailored to the specific company and market, we can gauge a high-level benchmark to see if 8202 is an outlier. This exercise can help direct shareholders to ask the right question about Ang’s incentive alignment. Typically, a SEHK small-cap is worth around HK$2.61B, produces earnings of HK$245M, and remunerates its CEO at roughly HK$3.3M per annum. Typically I would look at market cap and earnings as a proxy for performance, however, 8202’s negative earnings lower the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Ang is remunerated sensibly relative to peers. On the whole, even though 8202 is unprofitable, it seems like the CEO’s pay is reflective of the appropriate level.
Next Steps:
In the upcoming year’s AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Ang’s pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
Governance: To find out more about 8202’s governance, look through our infographic report of the company’s board and management.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 8202? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
