The results at Guangzhou R&F Properties Co., Ltd. (HKG:2777) have been quite disappointing recently and CEO Li Zhang bears some responsibility for this. At the upcoming AGM on 28 May 2021, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.
Comparing Guangzhou R&F Properties Co., Ltd.'s CEO Compensation With the industry
Our data indicates that Guangzhou R&F Properties Co., Ltd. has a market capitalization of HK$39b, and total annual CEO compensation was reported as CN¥5.2m for the year to December 2020. This means that the compensation hasn't changed much from last year. Notably, the salary of CN¥5.2m is the entirety of the CEO compensation.
For comparison, other companies in the same industry with market capitalizations ranging between HK$31b and HK$93b had a median total CEO compensation of CN¥5.1m. So it looks like Guangzhou R&F Properties compensates Li Zhang in line with the median for the industry. Furthermore, Li Zhang directly owns HK$11b worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, around 70% of total compensation represents salary and 30% is other remuneration. At the company level, Guangzhou R&F Properties pays Li Zhang solely through a salary, preferring to go down a conventional route. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
Guangzhou R&F Properties Co., Ltd.'s Growth
Over the last three years, Guangzhou R&F Properties Co., Ltd. has shrunk its earnings per share by 27% per year. Its revenue is down 5.4% over the previous year.
Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Guangzhou R&F Properties Co., Ltd. Been A Good Investment?
Given the total shareholder loss of 25% over three years, many shareholders in Guangzhou R&F Properties Co., Ltd. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.
Guangzhou R&F Properties pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We identified 4 warning signs for Guangzhou R&F Properties (1 is concerning!) that you should be aware of before investing here.
Important note: Guangzhou R&F Properties 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.
If you’re looking to trade a wide range of investments, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.