What We Learned About Huabang Financial Holdings' (HKG:3638) CEO Compensation

This article will reflect on the compensation paid to Lu George who has served as CEO of Huabang Financial Holdings Limited (HKG:3638) since 2016. This analysis will also assess whether Huabang Financial Holdings pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for Huabang Financial Holdings

How Does Total Compensation For Lu George Compare With Other Companies In The Industry?

Our data indicates that Huabang Financial Holdings Limited has a market capitalization of HK$877m, and total annual CEO compensation was reported as HK$1.8m for the year to March 2020. We note that's an increase of 77% above last year. Notably, the salary which is HK$1.70m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$1.9m. This suggests that Huabang Financial Holdings remunerates its CEO largely in line with the industry average. Furthermore, Lu George directly owns HK$29m worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, around 78% of total compensation represents salary and 22% is other remuneration. Huabang Financial Holdings pays out 94% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Huabang Financial Holdings Limited's Growth

Huabang Financial Holdings Limited has seen its earnings per share (EPS) increase by 72% a year over the past three years. Its revenue is up 18% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Huabang Financial Holdings Limited Been A Good Investment?

Since shareholders would have lost about 60% over three years, some Huabang Financial Holdings Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

As previously discussed, Lu is compensated close to the median for companies of its size, and which belong to the same industry. At the same time, the company has logged negative shareholder returns over the last three years. But EPS growth is moving in a favorable direction, certainly a positive sign. It's tough for us to say CEO compensation is too generous when EPS growth is positive, but negative investor returns will irk shareholders and reduce any chances of a raise.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 3 warning signs for Huabang Financial Holdings you should be aware of, and 2 of them can't be ignored.

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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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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