Key Insights
- Far East Hotels and Entertainment to hold its Annual General Meeting on 2nd of September
- CEO Derek Chiu's total compensation includes salary of HK$706.9k
- The total compensation is 64% less than the average for the industry
- Far East Hotels and Entertainment's total shareholder return over the past three years was 300% while its EPS was down 76% over the past three years
Shareholders may be wondering what CEO Derek Chiu plans to do to improve the less than great performance at Far East Hotels and Entertainment Limited (HKG:37) recently. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 2nd of September. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. We have prepared some analysis below to show that CEO compensation looks to be reasonable.
View our latest analysis for Far East Hotels and Entertainment
How Does Total Compensation For Derek Chiu Compare With Other Companies In The Industry?
At the time of writing, our data shows that Far East Hotels and Entertainment Limited has a market capitalization of HK$391m, and reported total annual CEO compensation of HK$735k for the year to March 2024. That's a notable increase of 17% on last year. We note that the salary portion, which stands at HK$706.9k constitutes the majority of total compensation received by the CEO.
For comparison, other companies in the Hong Kong Hospitality industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$2.0m. In other words, Far East Hotels and Entertainment pays its CEO lower than the industry median. Furthermore, Derek Chiu directly owns HK$95m worth of shares in the company, implying that they are deeply invested in the company's success.
| Component | 2024 | 2023 | Proportion (2024) |
| Salary | HK$707k | HK$600k | 96% |
| Other | HK$28k | HK$28k | 4% |
| Total Compensation | HK$735k | HK$628k | 100% |
On an industry level, roughly 87% of total compensation represents salary and 13% is other remuneration. Far East Hotels and Entertainment has gone down a largely traditional route, paying Derek Chiu a high salary, giving it preference over non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
A Look at Far East Hotels and Entertainment Limited's Growth Numbers
Over the last three years, Far East Hotels and Entertainment Limited has shrunk its earnings per share by 76% per year. It saw its revenue drop 20% over the last year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Far East Hotels and Entertainment Limited Been A Good Investment?
Most shareholders would probably be pleased with Far East Hotels and Entertainment Limited for providing a total return of 300% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
In Summary...
Far East Hotels and Entertainment pays its CEO a majority of compensation through a salary. Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. Shareholders might want to question the board about these concerns, and revisit their investment thesis for the company.
CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 2 warning signs for Far East Hotels and Entertainment that investors should look into moving forward.
Important note: Far East Hotels and Entertainment 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.