Key Insights

• Royal Deluxe Holdings' Annual General Meeting to take place on 19th of September
• Salary of HK$4.80m is part of CEO Lai Heng Chao's total remuneration
• The total compensation is 151% higher than the average for the industry
• Royal Deluxe Holdings' EPS declined by 7.4% over the past three years while total shareholder loss over the past three years was 38%

In the past three years, the share price of Royal Deluxe Holdings Limited (HKG:3789) has struggled to grow and now shareholders are sitting on a loss. Per share earnings growth is also poor, despite revenues growing. Shareholders will have a chance to take their concerns to the board at the next AGM on 19th of September and vote on resolutions including executive compensation, which studies show may have an impact on company performance. Here's why we think shareholders should hold off on a raise for the CEO at the moment.

Check out our latest analysis for Royal Deluxe Holdings

Comparing Royal Deluxe Holdings Limited's CEO Compensation With The Industry

According to our data, Royal Deluxe Holdings Limited has a market capitalization of HK$97m, and paid its CEO total annual compensation worth HK$5.2m over the year to March 2023. This was the same as last year. Notably, the salary which is HK$4.80m, represents most of the total compensation being paid.

In comparison with other companies in the Hong Kong Construction industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$2.1m. Accordingly, our analysis reveals that Royal Deluxe Holdings Limited pays Lai Heng Chao north of the industry median.

Speaking on an industry level, nearly 88% of total compensation represents salary, while the remainder of 12% is other remuneration. Although there is a difference in how total compensation is set, Royal Deluxe Holdings more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Royal Deluxe Holdings Limited's Growth

Over the last three years, Royal Deluxe Holdings Limited has shrunk its earnings per share by 7.4% per year. In the last year, its revenue is up 49%.

The reduction in EPS, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. It's hard to reach a conclusion about business performance right now. This may be one to watch. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Royal Deluxe Holdings Limited Been A Good Investment?

With a total shareholder return of -38% over three years, Royal Deluxe Holdings Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

The returns to shareholders is disappointing along with lack of earnings growth, which goes some way in explaining the poor returns. In the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan is in line with their expectations.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We identified 3 warning signs for Royal Deluxe Holdings (1 is significant!) that you should be aware of before investing here.

Switching gears from Royal Deluxe Holdings, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.