Key Insights

• Essex Bio-Technology will host its Annual General Meeting on 28th of May
• CEO Haizhou Fang's total compensation includes salary of HK$1.70m
• Total compensation is 79% below industry average
• Essex Bio-Technology's EPS grew by 8.6% over the past three years while total shareholder loss over the past three years was 49%

Performance at Essex Bio-Technology Limited (HKG:1061) has been rather uninspiring recently and shareholders may be wondering how CEO Haizhou Fang plans to fix this. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 28th of May. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

How Does Total Compensation For Haizhou Fang Compare With Other Companies In The Industry?

According to our data, Essex Bio-Technology Limited has a market capitalization of HK$1.4b, and paid its CEO total annual compensation worth HK$1.7m over the year to December 2023. Notably, that's a decrease of 8.6% over the year before. In particular, the salary of HK$1.70m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar companies from the Hong Kong Biotechs industry with market caps ranging from HK$780m to HK$3.1b, we found that the median CEO total compensation was HK$8.5m. This suggests that Haizhou Fang is paid below the industry median. Furthermore, Haizhou Fang directly owns HK$13m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 44% of total compensation out of all the companies we analyzed, while other remuneration made up 56% of the pie. Essex Bio-Technology has gone down a largely traditional route, paying Haizhou Fang a high salary, giving it preference over non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Essex Bio-Technology Limited's Growth

Over the past three years, Essex Bio-Technology Limited has seen its earnings per share (EPS) grow by 8.6% per year. In the last year, its revenue is up 30%.

It's hard to interpret the strong revenue growth as anything other than a positive. And in that context, the modest EPS improvement certainly isn't shabby. So while we'd stop short of saying growth is absolutely outstanding, there are definitely some clear positives! 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 Essex Bio-Technology Limited Been A Good Investment?

With a total shareholder return of -49% over three years, Essex Bio-Technology Limited shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Haizhou receives almost all of their compensation through a salary. The loss to shareholders over the past three years is certainly concerning. The lacklustre earnings growth perhaps may have something to do with the downward trend in the share price. The upcoming AGM will provide shareholders the opportunity to raise their concerns and evaluate if the board's judgement and decision-making is aligned with their expectations.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Essex Bio-Technology that investors should think about before committing capital to this stock.

Important note: Essex Bio-Technology 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.