We Think Towngas Smart Energy Company Limited's (HKG:1083) CEO Compensation Package Needs To Be Put Under A Microscope

Key Insights

• Towngas Smart Energy's Annual General Meeting to take place on 29th of May
• Salary of HK$1.34m is part of CEO Peter Wong's total remuneration
• The total compensation is 828% higher than the average for the industry
• Towngas Smart Energy's EPS declined by 1.8% over the past three years while total shareholder loss over the past three years was 29%

The results at Towngas Smart Energy Company Limited (HKG:1083) have been quite disappointing recently and CEO Peter Wong bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 29th of May. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for Towngas Smart Energy

How Does Total Compensation For Peter Wong Compare With Other Companies In The Industry?

Our data indicates that Towngas Smart Energy Company Limited has a market capitalization of HK$11b, and total annual CEO compensation was reported as HK$16m for the year to December 2023. That's a notable increase of 70% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at HK$1.3m.

On examining similar-sized companies in the Hong Kong Gas Utilities industry with market capitalizations between HK$7.8b and HK$25b, we discovered that the median CEO total compensation of that group was HK$1.7m. Hence, we can conclude that Peter Wong is remunerated higher than the industry median. What's more, Peter Wong holds HK$23m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	HK$1.3m	HK$1.3m	8%
Other	HK$15m	HK$8.2m	92%
Total Compensation	HK$16m	HK$9.5m	100%

Speaking on an industry level, nearly 67% of total compensation represents salary, while the remainder of 33% is other remuneration. Towngas Smart Energy pays a modest slice of remuneration through salary, as compared to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Towngas Smart Energy Company Limited's Growth

Towngas Smart Energy Company Limited has reduced its earnings per share by 1.8% a year over the last three years. It saw its revenue drop 1.2% over the last year.

The lack of EPS growth is certainly uninspiring. 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. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Towngas Smart Energy Company Limited Been A Good Investment?

Given the total shareholder loss of 29% over three years, many shareholders in Towngas Smart Energy Company Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 3 warning signs for Towngas Smart Energy (of which 1 is a bit concerning!) that you should know about in order to have a holistic understanding of the stock.

Important note: Towngas Smart Energy 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. 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.