Why We Think Newlink Technology Inc.'s (HKG:9600) CEO Compensation Is Not Excessive At All

Key Insights

• Newlink Technology's Annual General Meeting to take place on 26th of June
• Total pay for CEO Shuchun Zhai includes CN¥1.33m salary
• The total compensation is 40% less than the average for the industry
• Newlink Technology's EPS declined by 104% over the past three years while total shareholder return over the past three years was 26%

Performance at Newlink Technology Inc. (HKG:9600) has been rather uninspiring recently and shareholders may be wondering how CEO Shuchun Zhai plans to fix this. 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 26th of June. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. In our opinion, CEO compensation does not look excessive and we discuss why.

Check out our latest analysis for Newlink Technology

How Does Total Compensation For Shuchun Zhai Compare With Other Companies In The Industry?

According to our data, Newlink Technology Inc. has a market capitalization of HK$2.4b, and paid its CEO total annual compensation worth CN¥1.4m over the year to December 2023. We note that's an increase of 39% above last year. Notably, the salary which is CN¥1.33m, represents most of the total compensation being paid.

On comparing similar companies from the Hong Kong IT industry with market caps ranging from HK$1.6b to HK$6.2b, we found that the median CEO total compensation was CN¥2.4m. That is to say, Shuchun Zhai is paid under the industry median. Moreover, Shuchun Zhai also holds HK$758m worth of Newlink Technology stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	CN¥1.3m	CN¥926k	92%
Other	CN¥121k	CN¥116k	8%
Total Compensation	CN¥1.4m	CN¥1.0m	100%

On an industry level, roughly 85% of total compensation represents salary and 15% is other remuneration. Although there is a difference in how total compensation is set, Newlink Technology more or less reflects the market in terms of setting the salary. 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.

A Look at Newlink Technology Inc.'s Growth Numbers

Newlink Technology Inc. has reduced its earnings per share by 104% a year over the last three years. It saw its revenue drop 5.8% over the last year.

Few shareholders would be pleased to read that EPS have declined. 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. 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 Newlink Technology Inc. Been A Good Investment?

With a total shareholder return of 26% over three years, Newlink Technology Inc. shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

To Conclude...

While it's true that shareholders have seen decent returns, it's hard to overlook the lack of earnings growth and this makes us wonder if the current returns can continue. These are are some concerns that shareholders may want to address the board when they revisit their investment thesis.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Newlink Technology (of which 2 are significant!) that you should know about in order to have a holistic understanding of the stock.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com