Shareholders of Khong Guan Limited (SGX:K03) will have been dismayed by the negative share price return over the last three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 30 November 2022 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Khong Guan

How Does Total Compensation For Soo Eng Chew Compare With Other Companies In The Industry?

At the time of writing, our data shows that Khong Guan Limited has a market capitalization of S$34m, and reported total annual CEO compensation of S$462k for the year to July 2022. That's a slight decrease of 5.9% on the prior year. Notably, the salary which is S$371.9k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below S$276m, reported a median total CEO compensation of S$155k. This suggests that Soo Eng Chew is paid more than the median for the industry. Furthermore, Soo Eng Chew directly owns S$292k worth of shares in the company.

Talking in terms of the industry, salary represented approximately 91% of total compensation out of all the companies we analyzed, while other remuneration made up 9% of the pie. In Khong Guan's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Khong Guan Limited's Growth

Over the past three years, Khong Guan Limited has seen its earnings per share (EPS) grow by 15% per year. It achieved revenue growth of 12% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's a real positive to see this sort of revenue growth in a single year. That suggests a healthy and growing business. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Khong Guan Limited Been A Good Investment?

With a three year total loss of 25% for the shareholders, Khong Guan Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 3 warning signs for Khong Guan (2 are concerning!) that you should be aware of before investing here.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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