Why Fuxing China Group's (SGX:AWK) CEO Pay Matters

Qing Liang Hong became the CEO of Fuxing China Group Limited (SGX:AWK) in 2006, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Fuxing China Group pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for Fuxing China Group

How Does Total Compensation For Qing Liang Hong Compare With Other Companies In The Industry?

At the time of writing, our data shows that Fuxing China Group Limited has a market capitalization of S$11m, and reported total annual CEO compensation of S$1.1m for the year to December 2019. That's a modest increase of 3.5% on the prior year. Notably, the salary which is CN¥1.08m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under S$266m, the reported median total CEO compensation was S$87k. Accordingly, our analysis reveals that Fuxing China Group Limited pays Qing Liang Hong north of the industry median. Furthermore, Qing Liang Hong directly owns S$6.5m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 98% of total compensation represents salary, while the remainder of 1.7% is other remuneration. Fuxing China Group pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Fuxing China Group Limited's Growth Numbers

Earnings per share at Fuxing China Group Limited are much the same as they were three years ago, albeit slightly lower. In the last year, its revenue is down 16%.

The lack of EPS growth is certainly unimpressive. And the impression is worse when you consider revenue is down year-on-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 Fuxing China Group Limited Been A Good Investment?

With a three year total loss of 14% for the shareholders, Fuxing China Group Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Qing Liang receives almost all of their compensation through a salary. As we touched on above, Fuxing China Group Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. To make matters worse, EPS growth has also been negative during this period. Considering such poor performance, we think shareholders might be concerned if the CEO's compensation were to grow.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for Fuxing China Group that investors should be aware of in a dynamic business environment.

Important note: Fuxing China Group 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. 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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