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Tuesday, 23 June 2009
Big investors place premium on good investor relations
Most institutional investors are willing to pay a quantifiable premium for good investor relations (IR) but they view the standard of IR among Singapore Exchange-listed companies as ‘average’.
Big investors place premium on good investor relations: study
LYNETTE KHOO 23 June 2009
Most institutional investors are willing to pay a quantifiable premium for good investor relations (IR) but they view the standard of IR among Singapore Exchange-listed companies as ‘average’.
This finding emerged from the first dedicated study on the perception of Singapore-based institutional investors on IR standards in SGX-listed companies.
The discrepancy between the premium pegged to IR and the perceived standard suggests that companies should treat IR more seriously and devote more resources to this area, say Singapore Management University and Investor Relations Professionals Association (Singapore) (IRPAS), who jointly conducted the study.
They surveyed 38 Singapore-based fund managers representing 27 institutional investors with estimated equity assets under management in Asia totalling more than US$30 billion.
Eighty-nine per cent of them say they are willing to pay a quantifiable premium for companies with good IR. About 66 per cent are willing to pay a premium of up to 15 per cent while another 24 per cent are willing to pay a premium of more than 15 per cent.
By investing more in IR, companies may derive better valuation of their stocks, said SMU associate professor of corporate communication practice Mark Chong.
He felt that companies shouldn’t treat IR as an ad-hoc activity when there is good news to share or when it needs to undertake corporate action. ‘It is precisely when times are bad that they need to assure their investors,’ Dr Chong said.
He noted that several fund managers in the survey said transparency continues to be an issue among some SGX-listed companies.
Fund managers cited credibility of the management and IR officers (IROs) as the top quality they value. The second and third most important qualities are easy access to management and IROs, and timely and comprehensive disclosure.
The IR standard at Singapore-listed companies was rated an ‘average’ 6.42 points out of a full score of 10. The 30 companies on the Straits Times Index were given a higher rating of 7.18 points, while small and mid-cap companies were rated 5.32 points.
Respondents gave the thumbs-up to SingTel, CapitaLand, Singapore Airlines and Keppel Corp among the big caps and cited Olam International and Singapore Post among small and mid-caps with exemplary IR practices.
Dr. Chong noted that the IR teams at SingTel and Olam provide a high degree of access to senior management. SingTel even organises annual lunch meetings between fund managers and its board of directors.
IRPAS general manager Joseph Chia noted that Singapore-listed companies should seek to meet global standards as some fall on the radar of global fund managers.
But there are still misconceptions of IR among other senior management, Mr. Chia said, pointing to those who blame their IROs for ‘sell’ calls issued by analysts or for falling share prices. He felt that companies should have internal IR practices instead of fully outsourcing to IR agencies as an in-house IRO is able to provide better access to the management.
For small and mid-cap companies that find themselves financially challenged to devote more resources to IR, Mr. Chia suggests that they train the chief financial officer to play the dual role as an IRO.
Many S-chips or China-based companies listed in Singapore, however, tend to be start-ups with no prior knowledge or culture of disclosure, he said. These companies will require more training and guidance.
‘To help companies understand and improve their IR standards, IRPAS will continue to roll out courses on investor relations that are customised for Asian companies,’ Mr. Chia added.
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Big investors place premium on good investor relations: study
LYNETTE KHOO
23 June 2009
Most institutional investors are willing to pay a quantifiable premium for good investor relations (IR) but they view the standard of IR among Singapore Exchange-listed companies as ‘average’.
This finding emerged from the first dedicated study on the perception of Singapore-based institutional investors on IR standards in SGX-listed companies.
The discrepancy between the premium pegged to IR and the perceived standard suggests that companies should treat IR more seriously and devote more resources to this area, say Singapore Management University and Investor Relations Professionals Association (Singapore) (IRPAS), who jointly conducted the study.
They surveyed 38 Singapore-based fund managers representing 27 institutional investors with estimated equity assets under management in Asia totalling more than US$30 billion.
Eighty-nine per cent of them say they are willing to pay a quantifiable premium for companies with good IR. About 66 per cent are willing to pay a premium of up to 15 per cent while another 24 per cent are willing to pay a premium of more than 15 per cent.
By investing more in IR, companies may derive better valuation of their stocks, said SMU associate professor of corporate communication practice Mark Chong.
He felt that companies shouldn’t treat IR as an ad-hoc activity when there is good news to share or when it needs to undertake corporate action. ‘It is precisely when times are bad that they need to assure their investors,’ Dr Chong said.
He noted that several fund managers in the survey said transparency continues to be an issue among some SGX-listed companies.
Fund managers cited credibility of the management and IR officers (IROs) as the top quality they value. The second and third most important qualities are easy access to management and IROs, and timely and comprehensive disclosure.
The IR standard at Singapore-listed companies was rated an ‘average’ 6.42 points out of a full score of 10. The 30 companies on the Straits Times Index were given a higher rating of 7.18 points, while small and mid-cap companies were rated 5.32 points.
Respondents gave the thumbs-up to SingTel, CapitaLand, Singapore Airlines and Keppel Corp among the big caps and cited Olam International and Singapore Post among small and mid-caps with exemplary IR practices.
Dr. Chong noted that the IR teams at SingTel and Olam provide a high degree of access to senior management. SingTel even organises annual lunch meetings between fund managers and its board of directors.
IRPAS general manager Joseph Chia noted that Singapore-listed companies should seek to meet global standards as some fall on the radar of global fund managers.
But there are still misconceptions of IR among other senior management, Mr. Chia said, pointing to those who blame their IROs for ‘sell’ calls issued by analysts or for falling share prices. He felt that companies should have internal IR practices instead of fully outsourcing to IR agencies as an in-house IRO is able to provide better access to the management.
For small and mid-cap companies that find themselves financially challenged to devote more resources to IR, Mr. Chia suggests that they train the chief financial officer to play the dual role as an IRO.
Many S-chips or China-based companies listed in Singapore, however, tend to be start-ups with no prior knowledge or culture of disclosure, he said. These companies will require more training and guidance.
‘To help companies understand and improve their IR standards, IRPAS will continue to roll out courses on investor relations that are customised for Asian companies,’ Mr. Chia added.
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