Yahoo Finance Is Gameone Holdings Limited’s (HKG:8282) CEO Pay Fair?
Kin Fai Lam took the helm as Gameone Holdings Limited’s (SEHK:8282) CEO and grew market cap to HK$156.80M recently. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. I will break down Lam’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. Check out our latest analysis for Gameone Holdings
Did Lam create value?
8282 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, 8282 produced negative earnings of -HK$13.38M , which is a further decline from prior year’s loss of -HK$12.25M. Additionally, on average, 8282 has been loss-making in the past, with a 5-year average EPS of -HK$0.021. 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 event, CEO compensation should represent the current state of the business. In the most recent report, Lam’s total remuneration rose by 36.52% to HK$671.00K. Although I couldn’t find information on the composition of Lam’s pay, if some portion were non-cash items such as stocks and options, then fluctuations in 8282’s share price can affect the actual level of what the CEO actually takes home at the end of the day.
Is 8282 overpaying the CEO?
While there is no cookie-cutter approach, since compensation should be tailored to the specific company and market, we can evaluate a high-level yardstick to see if 8282 deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Lam’s incentive alignment. Generally, a SEHK small-cap has a value of HK$2.61B, creates earnings of HK$245M, and pays its CEO at roughly HK$3.3M per year. Typically I would look at market cap and earnings as a proxy for performance, however, 8282’s negative earnings lower the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Lam is being paid within the bounds of reasonableness. Overall, although 8282 is unprofitable, it seems like the CEO’s pay is sound.
Next Steps:
CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Is Lam remunerated appropriately based on other factors we have not covered today? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. 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 8282’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 8282? 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.
