Is King Stone Energy Group Limited’s (HKG:663) CEO Being Overpaid?

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Hao Zong has been the CEO of King Stone Energy Group Limited (HKG:663) since 2013. First, this article will compare CEO compensation with compensation at similar sized companies. Next, we’ll consider growth that the business demonstrates. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for King Stone Energy Group

How Does Hao Zong’s Compensation Compare With Similar Sized Companies?

Our data indicates that King Stone Energy Group Limited is worth HK$869m, and total annual CEO compensation is HK$6.4m. (This number is for the twelve months until December 2018). While we always look at total compensation first, we note that the salary component is less, at HK$123k. We looked at a group of companies with market capitalizations under HK$1.6b, and the median CEO total compensation was HK$1.8m.

As you can see, Hao Zong is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean King Stone Energy Group Limited is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at King Stone Energy Group has changed from year to year.

SEHK:663 CEO Compensation, July 18th 2019
SEHK:663 CEO Compensation, July 18th 2019

Is King Stone Energy Group Limited Growing?

Over the last three years King Stone Energy Group Limited has grown its earnings per share (EPS) by an average of 81% per year (using a line of best fit). It achieved revenue growth of 26% over the last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see.

Has King Stone Energy Group Limited Been A Good Investment?

Since shareholders would have lost about 54% over three years, some King Stone Energy Group Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

We examined the amount King Stone Energy Group Limited pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

However, the earnings per share growth over three years is certainly impressive. Having said that, shareholders may be disappointed with the weak returns over the last three years. Considering the per share profit growth, but keeping in mind the weak returns, we’d need more time to form a view on CEO compensation. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling King Stone Energy Group (free visualization of insider trades).

Important note: King Stone Energy Group may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.