Is LVGEM (China) Real Estate Investment Company Limited’s (HKG:95) CEO Pay Justified?

Shouchun Tang has been the CEO of LVGEM (China) Real Estate Investment Company Limited (HKG:95) since 2016. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for LVGEM (China) Real Estate Investment

How Does Shouchun Tang’s Compensation Compare With Similar Sized Companies?

According to our data, LVGEM (China) Real Estate Investment Company Limited has a market capitalization of HK$11b, and pays its CEO total annual compensation worth CN¥5.3m. (This is based on the year to December 2017). While we always look at total compensation first, we note that the salary component is less, at CN¥2.3m. We looked at a group of companies with market capitalizations from CN¥6.7b to CN¥22b, and the median CEO total compensation was CN¥2.8m.

It would therefore appear that LVGEM (China) Real Estate Investment Company Limited pays Shouchun Tang more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see a visual representation of the CEO compensation at LVGEM (China) Real Estate Investment, below.

SEHK:95 CEO Compensation, April 4th 2019
SEHK:95 CEO Compensation, April 4th 2019

Is LVGEM (China) Real Estate Investment Company Limited Growing?

On average over the last three years, LVGEM (China) Real Estate Investment Company Limited has grown earnings per share (EPS) by 21% each year (using a line of best fit). In the last year, its revenue is up 52%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. We don’t have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has LVGEM (China) Real Estate Investment Company Limited Been A Good Investment?

LVGEM (China) Real Estate Investment Company Limited has served shareholders reasonably well, with a total return of 12% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary…

We compared the total CEO remuneration paid by LVGEM (China) Real Estate Investment Company Limited, and compared it to remuneration at a group of 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. We also note that, over the same time frame, shareholder returns haven’t been bad. While it may be worth researching further, we don’t see a problem with the CEO pay, given the good EPS growth. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at LVGEM (China) Real Estate Investment.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

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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.