Our View On Shenzhen Investment's (HKG:604) CEO Pay

Wei Huang became the CEO of Shenzhen Investment Limited (HKG:604) 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Shenzhen Investment.

See our latest analysis for Shenzhen Investment

Comparing Shenzhen Investment Limited's CEO Compensation With the industry

At the time of writing, our data shows that Shenzhen Investment Limited has a market capitalization of HK$22b, and reported total annual CEO compensation of HK$5.9m for the year to December 2019. That's a slight decrease of 6.4% on the prior year. We note that the salary portion, which stands at HK$3.08m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between HK$16b and HK$50b had a median total CEO compensation of HK$5.9m. From this we gather that Wei Huang is paid around the median for CEOs in the industry.

Speaking on an industry level, nearly 71% of total compensation represents salary, while the remainder of 29% is other remuneration. Shenzhen Investment sets aside a smaller share of compensation for salary, in comparison to the overall industry. 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.

Shenzhen Investment Limited's Growth

Over the last three years, Shenzhen Investment Limited has shrunk its earnings per share by 13% per year. Its revenue is up 50% over the last year.

The decrease in EPS could be a concern for some investors. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. 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 Shenzhen Investment Limited Been A Good Investment?

With a three year total loss of 7.4% for the shareholders, Shenzhen Investment Limited would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be lessto generous with CEO compensation.

To Conclude...

As we noted earlier, Shenzhen Investment pays its CEO in line with similar-sized companies belonging to the same industry. However, revenues have increased over the past year, a positive sign for the company. Contrarily, shareholder returns are in the red over the same stretch. EPS is also not growing, undoubtedly leading to further headaches. We'd say CEO compensation isn't unfair, but shareholders may be wary of a bump in pay before the company substantially improves overall performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 3 warning signs for Shenzhen Investment you should be aware of, and 2 of them shouldn't be ignored.

Important note: Shenzhen Investment 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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