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Is China Everbright Limited’s (HKG:165) CEO Incentives Align With Yours?

In 2007 Shuang Chen was appointed CEO of China Everbright Limited (HKG:165). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for China Everbright

How Does Shuang Chen’s Compensation Compare With Similar Sized Companies?

According to our data, China Everbright Limited has a market capitalization of HK$22.3b, and pays its CEO total annual compensation worth HK$14m. That’s a notable increase of 22% on last year. When we examined a selection of companies with market caps ranging from HK$15.7b to HK$50.2b, we found the median CEO compensation was HK$3m.

It would therefore appear that China Everbright Limited pays Shuang Chen more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see, below, how CEO compensation at China Everbright has changed over time.

SEHK:165 CEO Compensation October 31st 18

Is China Everbright Limited Growing?

On average over the last three years, China Everbright Limited has shrunk earnings per share by 3.8% each year. In the last year, its revenue is up 20%.

Few shareholders would be pleased to read that earnings per share are lower over three years. There’s no doubt that the silver lining is that revenue is up. But it isn’t sufficiently fast growth wto overlook the fact that earnings per share has gone backwards over three years. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO.

Shareholders might be interested in this free visualization of analyst forecasts. .

Has China Everbright Limited Been A Good Investment?

Since shareholders would have lost about 16% over three years, some China Everbright Limited shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

We compared the total CEO remuneration paid by China Everbright Limited, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

We think many shareholders would be underwhelmed with the business growth over the last three years.

Just as bad, share price gains for investors have failed to materialize, over the same period. This contrasts with the growth in CEO remuneration, year on year. Some might well form the view that the CEO is paid too generously! Shareholders may want to check for free if China Everbright Limited insiders are buying or selling shares.

Or you might rather take a peek at this analytical visualization of historic cash flow, earnings and revenue.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.