We think shareholders may want to consider a review of Austar Lifesciences Limited’s (HKG:6118) CEO compensation package.

Key ideas

• Austar Lifesciences Annual General Meeting to be held on May 31
• CEO Mars Ho’s total salary includes salary of CN¥919.0k
• Overall salary is comparable to the industry average
• Austar Lifesciences’ three-year loss to shareholders was 92% while its EPS was down 51% over the last three years.

Austar Lifesciences Limited (HKG:6118) has not performed well recently and CEO Mars Ho will likely need to up his game. Shareholders will be interested in what the board has to say about improving performance at the next annual general meeting on May 31. This would also be an opportunity for shareholders to influence management by voting on company resolutions such as executive compensation, which could have a significant impact on the company. The data we present below explains why we believe CEO compensation is inconsistent with recent performance.

Check out our latest analysis for Austar Lifesciences

Austar Lifesciences Limited CEO Compensation Compared to Industry

At the time of writing, our data shows that Austar Lifesciences Limited has a market capitalization of HK$410 million and reported total annual CEO compensation of CN¥935,000 for the year ending in December 2023. This represents only a slight increase of 4.5% compared to last year. . In particular, the salary of CN¥919,000 represents a significant portion of the total compensation paid to the CEO.

Comparing similarly sized companies in Hong Kong’s life sciences sector with market capitalizations below HK$1.6 billion, we found that the median CEO total compensation was HK$1.1 million. of CN¥. So it appears that Austar Lifesciences is paying Mars Ho in line with the industry median. Additionally, Mars Ho also owns shares of Austar Lifesciences worth HK$275 million directly under their own name, which reveals to us that they hold a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	CN¥919,000	CN¥880,000	98%
Other	CN¥16,000	CN¥15,000	2%
Total compensation	CN¥935,000	CN¥895,000	100%

In terms of industry, salary made up about 61% of total compensation for all the companies we analyzed, while other compensation made up 39% of the pie. Austar Lifesciences strives to take a more traditional approach and pays a higher proportion of compensation in the form of salary than non-salary benefits. If total compensation is oriented towards salary, this suggests that the variable part, generally linked to performance, is lower.

A look at Austar Lifesciences Limited’s growth figures

Over the last three years, Austar Lifesciences Limited has reduced its earnings per share by 51% per year. It has seen its revenue fall by 18% over the past year.

Few shareholders would be happy to read that EPS has declined. This situation is compounded by the fact that revenues are actually lower than last year. So, given this relatively weak performance, shareholders would probably not want to see high CEO compensation. While we don’t have analyst forecasts, you may want to evaluate this data-rich visualization of earnings, revenue and cash flow.

Was Austar Lifesciences Limited a good investment?

With a total shareholder return of -92% over three years, Austar Lifesciences Limited shareholders would be disappointed overall. It could therefore be upsetting for shareholders if the CEO was generously paid.

In summary…

Austar Lifesciences pays its CEO a majority of compensation in the form of salary. Along with the company’s poor performance, shareholders have suffered from low price returns on their investments, suggesting there is little, if any, chance they will support a CEO pay increase. At the upcoming AGM, management will have the opportunity to explain how they plan to get the business back on track and address investor concerns.

CEO compensation can have a huge impact on performance, but it’s only one part. This is why we dug and identified 2 warning signs for Austar Lifesciences which investors should consider before committing capital to this stock.

Important note: Austar Lifesciences is an interesting stock, but we understand that investors may be looking for a clean balance sheet and exceptional returns. Maybe you’ll find something better in this list of interesting companies with high ROE and low debt.

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