This Is Why Applied Development Holdings Limited's (HKG:519) CEO Compensation Looks Appropriate

Key Insights

• Applied Development Holdings to hold its Annual General Meeting on 12th of December
• Salary of HK$1.03m is part of CEO Zhanming Wu's total remuneration
• Total compensation is 35% below industry average
• Over the past three years, Applied Development Holdings' EPS grew by 27% and over the past three years, the total loss to shareholders 66%

Shareholders may be wondering what CEO Zhanming Wu plans to do to improve the less than great performance at Applied Development Holdings Limited (HKG:519) recently. One way they can exercise their influence on management is through voting on resolutions, such as executive remuneration at the next AGM, coming up on 12th of December. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. In our opinion, CEO compensation does not look excessive and we discuss why.

View our latest analysis for Applied Development Holdings

How Does Total Compensation For Zhanming Wu Compare With Other Companies In The Industry?

Our data indicates that Applied Development Holdings Limited has a market capitalization of HK$211m, and total annual CEO compensation was reported as HK$1.4m for the year to June 2023. That's a notable increase of 8.7% on last year. Notably, the salary which is HK$1.03m, represents most of the total compensation being paid.

On comparing similar-sized companies in the Hong Kong Real Estate industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$2.1m. That is to say, Zhanming Wu is paid under the industry median. Furthermore, Zhanming Wu directly owns HK$57m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	HK$1.0m	HK$1.0m	74%
Other	HK$354k	HK$240k	26%
Total Compensation	HK$1.4m	HK$1.3m	100%

On an industry level, roughly 77% of total compensation represents salary and 23% is other remuneration. Applied Development Holdings is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Applied Development Holdings Limited's Growth Numbers

Over the past three years, Applied Development Holdings Limited has seen its earnings per share (EPS) grow by 27% per year. It achieved revenue growth of 547% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Applied Development Holdings Limited Been A Good Investment?

With a total shareholder return of -66% over three years, Applied Development Holdings Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

The fact that shareholders are sitting on a loss is certainly disheartening. This diverges with the robust growth in EPS, suggesting that there is a large discrepancy between share price and fundamentals. There needs to be more focus by management and the board to examine why the share price has diverged from fundamentals. The upcoming AGM will provide shareholders the opportunity to raise their concerns and evaluate if the board’s judgement and decision-making is aligned with their expectations.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 4 warning signs for Applied Development Holdings (of which 2 don't sit too well with us!) that you should know about in order to have a holistic understanding of the stock.

Important note: Applied Development 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. 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.