Is AKM Industrial Company Limited’s (HKG:1639) CEO Being Overpaid?

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In 2004 Zhi Chai was appointed CEO of AKM Industrial Company Limited (HKG:1639). First, this article will compare CEO compensation with compensation at similar sized companies. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for AKM Industrial

How Does Zhi Chai’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that AKM Industrial Company Limited has a market cap of HK$2.1b, and is paying total annual CEO compensation of HK$917k. (This figure is for the year to 2017). While we always look at total compensation first, we note that the salary component is less, at HK$691k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of HK$785m to HK$3.1b. The median total CEO compensation was HK$2.0m.

This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.

You can see, below, how CEO compensation at AKM Industrial has changed over time.

SEHK:1639 CEO Compensation, February 20th 2019
SEHK:1639 CEO Compensation, February 20th 2019

Is AKM Industrial Company Limited Growing?

Over the last three years AKM Industrial Company Limited has grown its earnings per share (EPS) by an average of 73% per year (using a line of best fit). It achieved revenue growth of 12% over the last year.

This demonstrates that the company has been improving recently. A good result. It’s also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. Although we don’t have analyst forecasts, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has AKM Industrial Company Limited Been A Good Investment?

I think that the total shareholder return of 105%, over three years, would leave most AKM Industrial Company Limited shareholders smiling. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.

In Summary…

It appears that AKM Industrial Company Limited remunerates its CEO below most similar sized companies. Since the business is growing, many would argue this suggests the pay is modest. The strong history of shareholder returns might even have some thinking that Zhi Chai deserves a raise!

It’s not often we see shareholders do so well, and yet the CEO is paid modestly. The cherry on top would be if company insiders are buying shares with their own money. Whatever your view on compensation, you might want to check if insiders are buying or selling AKM Industrial shares (free trial).

If you want to buy a stock that is better than AKM Industrial, this free list of high return, low debt companies is a great place to look.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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.