Here’s Why Shareholders May Want To Be Cautious With Increasing Hong Leong Finance Limited’s (SGX:S41) CEO Pay Packet

Key Insights

• Hong Leong Finance’s Annual General Meeting to take place on 25th of April

• Salary of S$1.13m is part of CEO Leng Beng Kwek’s total remuneration

• Total compensation is 309% above industry average

• Hong Leong Finance’s total shareholder return over the past three years was 16% while its EPS grew by 13% over the past three years

CEO Leng Beng Kwek has done a decent job of delivering relatively good performance at Hong Leong Finance Limited (SGX:S41) recently. This is something shareholders will keep in mind as they cast their votes on company resolutions such as executive remuneration in the upcoming AGM on 25th of April. However, some shareholders will still be cautious of paying the CEO excessively.

See our latest analysis for Hong Leong Finance

Comparing Hong Leong Finance Limited’s CEO Compensation With The Industry

At the time of writing, our data shows that Hong Leong Finance Limited has a market capitalization of S$1.1b, and reported total annual CEO compensation of S$3.0m for the year to December 2023. That is, the compensation was roughly the same as last year. While we always look at total compensation first, our analysis shows that the salary component is less, at S$1.1m.

In comparison with other companies in the Singapore Consumer Finance industry with market capitalizations ranging from S$545m to S$2.2b, the reported median CEO total compensation was S$727k. Accordingly, our analysis reveals that Hong Leong Finance Limited pays Leng Beng Kwek north of the industry median. Furthermore, Leng Beng Kwek directly owns S$17m worth of shares in the company, implying that they are deeply invested in the company’s success.

Talking in terms of the industry, salary represented approximately 89% of total compensation out of all the companies we analyzed, while other remuneration made up 11% of the pie. In Hong Leong Finance’s case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It’s important to note that a slant towards non-salary compensation suggests that total pay is tied to the company’s performance.

Hong Leong Finance Limited’s Growth

Hong Leong Finance Limited has seen its earnings per share (EPS) increase by 13% a year over the past three years. In the last year, its revenue is down 15%.

Shareholders would be glad to know that the company has improved itself over the last few years. It’s always a tough situation when revenues are not growing, but ultimately profits are more important. 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.

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Has Hong Leong Finance Limited Been A Good Investment?

With a total shareholder return of 16% over three years, Hong Leong Finance Limited shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary…

Given that the company’s overall performance has been reasonable, the CEO remuneration policy might not be shareholders’ central point of focus in the upcoming AGM. However, if the board proposes to increase the compensation, some shareholders might have questions given that the CEO is already being paid higher than the industry.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We’ve identified 1 warning sign for Hong Leong Finance that investors should be aware of in a dynamic business environment.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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.