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SCMP Reporter

Sticking the boot into complacent directors at listed companies is a well-established pastime of green-mailers, raiders and corporate governance activists in the West.

  However, in Hong Kong this type of activity is relatively rare, which means directors at Pioneer Industries International are about to get a rude 'hello' from substantial shareholder Regent Pacific.

  The corporate raiders want the management at Pioneer to realise the value of a strategic 5 per cent holding in Bangkok Bank.

  The Gaw family behind the company, with about a 35 per cent stake, has to date categorically refused to do anything of the sort.

  Such an action would unlock, at a valuation taken yesterday, about $3 billion. The market capitalisation of Pioneer, according to Bloomberg, was $2.27 billion yesterday.

  Pioneer has additional strategic investments including a 20 per cent stake in Wah Kwong Shipping, worth about $277 million, along with property holdings in Hong Kong and Malaysia.

  Quite clearly there is an opportunity at Pioneer for someone who has the gall to tell the Chinese family behind the company how to run its business.

  Regent is believed to have, or be linked to interests with, about 20 per cent of the company.

   Most of the corporate interest was bought in a sale of 13 per cent stake by Cheung Kong last November.

  The chaps at Regent have called a special meeting next month to introduce 13 new directors to the 11-member board at Pioneer. A second intrusion on the prerogatives of the Gaw family is a proposal to force the company to dispose of the Bangkok Bank stake.

  In their defence, the Gaw family has stated Pioneer was a strategic investor. Annual revenues from the Bangkok Bank stake amounted to $70 million in 1995, up from $38 million in 1994. In 1995 turnover was $91.4 million, up from $72.9 million while profit attributable was $66 million, up from $59.8 million. There would not be much left of the company if the Bangkok Bank stake - a long-term investment - was sold, say the Gaws.

  Some investors reckon this is total twaddle.

  Company listings are not there for the convenience of some private family interest. A listing implies public obligations and duties on the directors. Obtaining shareholder value ought to be a top priority of any management at listed companies in Hong Kong. Otherwise, why maintain a listing at all?   In a review of Pioneer's achievements in recent years it is quite difficult to ascertain where the Gaw family actually adds any value to the company. However, what is easy to determine is how much value the Gaws get out of the company.

  The table shows the level of dividend payout ratio and the payout ratio including the dividend payout and the director's emoluments. The overall payout ratio has never been less than 85 per cent of attributable profit. In 1993 the overall payout exceeded the profit.

  Given this, it appears rather difficult for the management to argue they put anything but a minor proportion of profit back into the company.

  Pioneer is a major cash cow. It is akin to the family's own listed ATM machine.

  In this context, and the huge quantity of value locked-up in this company, it seems appropriate that shareholders should decide to break-up the listed vehicle and realise the potential gain.



Rude 'hello' looms for Pioneer's Gaw family