How Should Investors React To Sunac China Holdings' (HKG:1918) CEO Pay?

Mengde Wang became the CEO of Sunac China Holdings Limited (HKG:1918) in 2015, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. 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 Sunac China Holdings

Comparing Sunac China Holdings Limited's CEO Compensation With the industry

According to our data, Sunac China Holdings Limited has a market capitalization of HK$144b, and paid its CEO total annual compensation worth CN¥43m over the year to December 2019. That's a notable increase of 41% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at CN¥7.5m.

For comparison, other companies in the industry with market capitalizations above HK$62b, reported a median total CEO compensation of CN¥19m. This suggests that Mengde Wang is paid more than the median for the industry. Furthermore, Mengde Wang directly owns HK$445m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 70% of total compensation represents salary, while the remainder of 30% is other remuneration. It's interesting to note that Sunac China Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Sunac China Holdings Limited's Growth Numbers

Sunac China Holdings Limited's earnings per share (EPS) grew 77% per year over the last three years. Its revenue is up 9.5% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Sunac China Holdings Limited Been A Good Investment?

With a three year total loss of 12% for the shareholders, Sunac China Holdings Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

As we touched on above, Sunac China Holdings Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But the company has impressed with its EPS growth, but shareholder returns — over the same period — have been disappointing. Although we'd stop short of calling it inappropriate, we think Mengde is earning a very handsome sum.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 5 warning signs (and 1 which is a bit unpleasant) in Sunac China Holdings we think you should know about.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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