What Can We Learn About RENHENG Enterprise Holdings' (HKG:3628) CEO Compensation?

This article will reflect on the compensation paid to Li Liu who has served as CEO of RENHENG Enterprise Holdings Limited (HKG:3628) since 2016. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for RENHENG Enterprise Holdings

Comparing RENHENG Enterprise Holdings Limited's CEO Compensation With the industry

According to our data, RENHENG Enterprise Holdings Limited has a market capitalization of HK$88m, and paid its CEO total annual compensation worth HK$1.2m over the year to December 2019. This means that the compensation hasn't changed much from last year. In particular, the salary of HK$1.22m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$1.3m. This suggests that RENHENG Enterprise Holdings remunerates its CEO largely in line with the industry average. Moreover, Li Liu also holds HK$66m worth of RENHENG Enterprise Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 86% of total compensation out of all the companies we analyzed, while other remuneration made up 14% of the pie. RENHENG Enterprise Holdings is focused on going down a more traditional approach and is paying a higher portion of compensation through salary, as compared to non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

RENHENG Enterprise Holdings Limited's Growth

RENHENG Enterprise Holdings Limited has seen its earnings per share (EPS) increase by 76% a year over the past three years. In the last year, its revenue is down 19%.

This demonstrates that the company has been improving recently and is good news for the shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. 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 RENHENG Enterprise Holdings Limited Been A Good Investment?

With a three year total loss of 84% for the shareholders, RENHENG Enterprise Holdings Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Li receives almost all of their compensation through a salary. As we touched on above, RENHENG Enterprise Holdings Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. On the other hand, the company has logged negative shareholder returns over the previous three years. But on the bright side, EPS growth is positive over the same period. Considering positive EPS growth, we'd say compensation is fair, but shareholders may be wary of a bump in pay before the company logs positive returns.

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. That's why we did some digging and identified 3 warning signs for RENHENG Enterprise Holdings that investors should think about before committing capital to this stock.

Important note: RENHENG Enterprise Holdings 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. 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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