Key Insights

• Lumina Group will host its Annual General Meeting on 15th of September
• Salary of HK$3.60m is part of CEO Hau Fai Fok's total remuneration
• The total compensation is 327% higher than the average for the industry
• Lumina Group's three-year loss to shareholders was 25% while its EPS was down 147% over the past three years

Lumina Group Limited (HKG:1162) has not performed well recently and CEO Hau Fai Fok will probably need to up their game. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 15th of September. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Lumina Group

Comparing Lumina Group Limited's CEO Compensation With The Industry

Our data indicates that Lumina Group Limited has a market capitalization of HK$87m, and total annual CEO compensation was reported as HK$7.9m for the year to March 2023. This was the same amount the CEO received in the prior year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at HK$3.6m.

On comparing similar-sized companies in the Hong Kong Commercial Services industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$1.9m. Hence, we can conclude that Hau Fai Fok is remunerated higher than the industry median. What's more, Hau Fai Fok holds HK$62m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 79% of total compensation out of all the companies we analyzed, while other remuneration made up 21% of the pie. It's interesting to note that Lumina Group allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Lumina Group Limited's Growth

Over the last three years, Lumina Group Limited has shrunk its earnings per share by 147% per year. Revenue was pretty flat on last year.

Overall this is not a very positive result for shareholders. And the flat revenue is seriously uninspiring. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Lumina Group Limited Been A Good Investment?

Given the total shareholder loss of 25% over three years, many shareholders in Lumina Group Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 3 warning signs for Lumina Group (of which 1 is a bit concerning!) that you should know about in order to have a holistic understanding of the stock.

Important note: Lumina Group is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.