Losses pile pressure on property broker Midland's dominant family
Wongs blamedby investors for huge losses at real estate broker, amid accusations that the family enriches itself at the expense of the company
Family-run conglomerates are among the largest and most successful in Hong Kong, with the Cheung Kong group leading the pack with its diversified global operations.
In sharp contrast, Midland Holdings may soon report its largest loss ever and the family of Freddie Wong Kin-yip, which runs the company, are being blamed for the financial mess.
The real estate broker's woes are highlighted by the fact that its principal rival, unlisted Centaline Property Agency, saw its Hong Kong operation post a profit of HK$280 million last year despite a downward trend in the local housing market, due largely to government cooling measures.
Disgruntled by what it sees as mismanagement of Midland's financial affairs, minority investor Apex Benchmark said on Tuesday that it would sell down its Midland shares unless the Wong family changes the way it runs the company.
The Wongs can ill afford to ignore Apex's threat as it holds a 7.3 per cent stake, making it the third largest Midland shareholder.
Sources with inside knowledge of Midland reveal the management practices which Apex was probably alluding to.
"Only one family gets richer at Midland regardless of the market ups and downs" said a former Midland sales agent.
Wong, the chairman, cut his annual salary by nearly 90 per cent to HK$200,000 only after the firm reported an interim loss of HK$88.73 million for the six months to June last year. On August 23 last year he entered into a consultancy agreement with the firm to boost his earnings, three months before Midland issued a profit warning for the second half of this year.
Under the agreement Wong, who is the largest shareholder with a 16.73 per cent stake, will be a strategic consultant for the firm for two years with an annual consultancy fee of HK$3.36 million.
In 2012, Wong received a director's emolument of HK$32.97 million, 20 per cent higher than Cheung Kong executive director Justin Chiu Kwok-hung's HK$27.24 million during the same period.
Midland's executive director Metty Tang Mei-lai, Wong's wife, reduced her salary to HK$280,000 per year in 2013, down from HK$8.89 million.
No information is available on any salary cuts for Wong's daughter, Angela Wong Ching-yi, who serves as deputy chairwoman. She was asked to step down by a group of agents who marched to Midland headquarters on Monday, citing her mismanagement. Angela Wong received an emolument of HK$9 million in 2012.
Besides drawing fat salaries from Midland, Freddie Wong has repeatedly bought and sold shares of the company in what some observers have described as speculative deals in nature.
In 2007, he disposed of 64 million shares at HK$7.85 to pocket HK$502 million, reducing his stake to 10 per cent from 18.76 per cent. He started to increase his stake to 13 per cent in 2008 when the firm's share price dropped to about HK$2.10 and HK$2.30. But when the price soared to HK$5.90 in May 2010, Wong made another killing by selling 60 million shares for HK$354 million, reducing his stake to just over 5 per cent.
"Midland is a rare example of the largest shareholder daring to cut its shareholding to such a low level," said Ricky Tam Siu-hing, a director of Champlus Asset Management.
The move risks a hostile takeover bid or a call to action from institutional investors, Tam said.
In October 2008, investor Leung Heung-wing increased his Midland stake to 14.4 per cent, to become the biggest shareholder of Midland, forcing Wong, whose holding was at 13.17 per cent, to raise his stake to avert a hostile takeover.
While the Wong family derives significant financial benefit from running Midland, they have failed to put an end to continuing personnel chaos in the company.
More than 30 real estate agents on Monday marched to Midland's head office in Central to protest against the sacking of six sales directors.
Frequent changes among senior sales personnel has been cited as a significant factor in declining sales growth.
"A good quality listed corporation should listen to the views of their employees and investors when it comes to settling disputes," said Albert Wong Kam-hong, former deputy chairman of Midland.
Midland's largest rival Centaline is again on track to post strong earnings again this year, unlike Midland.
"We adopt a profit-sharing system," said Shih Wing-ching, Centaline's founder. "No matter if you are tea ladies or drivers, you will earn more when the firm makes good money. Everyone has the same goal to drive the company to perform better."
Shih added that Centaline is No1 with a 30 per cent share of the market, noting that Midland's internal disputes have stalled its sales.
"I'm not interested in taking over Midland as I don't want people to accuse me of having a monopoly," Shih said.