Arkadin webinar ir best practice in 2011 (final)
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IR Best Practice in 2011Means… Credible business model and long-term value creation strategy Understanding of investors, markets and insiders’ expectations Investor Relations part of the strategic decision process Wide exposure of management to the investment community Consistent and continuing communications strategy Transparency – simplicity of reporting/communication Ongoing targeting program to optimise liquidity Corporate Social Responsibility (CSR) to be taken serious Regular measurement of impact – quantitative/qualitative
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Arkadin webinar ir best practice in 2011 (final)
- 1. Investor Relations Best Practice in 2011 – Strategy and Value Optimization Speaker: Lynge Blak, CEO Lynge Blak Investor Relations Limited Lynge Blak Investor Relations Limited 1
- 2. Definition of Investor Relations Investor relations is a strategic management responsibility integrates finance, communication, marketing and securities law compliance enables the most effective two-way communication between and issuer, the financial community and other constituencies ultimately contributes to a company’s securities achieving fair valuation Lynge Blak Investor Relations Limited 2 Basic IR disciplines Finance Comm. Marketing Securities law
- 3. Why Financial Communication? Financial communication should be carried out to ensure that: 3Lynge Blak Investor Relations Limited all investors have the information necessary to enable them to become fully and fairly informed about all material information, enabling them to make reasonable investment decisions
- 4. HighDisclosureLevelLow Tactical Business Value Strategic The Investor Relations Components Intelligence Investor targeting Peer tracking Benchmarking Compliance News releases Public filings Outreach IR websites Webcasts E-mail broadcasts PR/Media relations Transparency Corporate governance Financial statements Accurate guidance 4Lynge Blak Investor Relations Limited
- 5. Company Shareholders Institutional Investors Private Investors Buy-side Sell-side I-banks Brokers Financial media Staff Portfolio Managers Investment Managers Money Managers Mutual funds Hedge funds Pension funds Insurance Aggressive growth Growth GARP Value Deep value Hedging Income / Yield SRI Index CEO Corporate Secretary CFO IR Manager PR Manager Legal Counsel External advisors Audience Investor types Investment styles Different audience / different interpretation / different messages DIFFERENTIATION – prepare your communication strategy 5Lynge Blak Investor Relations Limited
- 6. The Art of Communication Value Lynge Blak Investor Relations Limited 6 Step 1: determine the investment proposition a company presents Step 2: identify and target the appropriate investor and analyst audience Step 3: develop the communications platform to present to the targeted investor and analyst audience Step 4: build relationships with the target investor and analyst audience and maintain consistent communication with the marketplace so the key value drivers of a company’s business are current and obvious to investors
- 7. The Investor Relations Process -1- Determine the company’s investment proposition by asking your audience Are company performance and business strategy perceived in line with those of The Board of Directors and The Board of Management? Benchmarking IR for added value with: Investor Perception Survey & Investor Peer-Group Survey Why? To help the IRO to understand How your IR program is performing relative to peers Whether your IR ”boat” is riding the waves or ”beached” while your peers move ahead Who do you benchmark against? Industry peers Alternate investments to your company – investment peers Lynge Blak Investor Relations Limited 7
- 8. The Investor Relations Process -2- Identify your ideal investor and analyst audience Have you been considering to investigate your peer- group audience? Add Value with Investor Targeting The goal of a targeting program is to align the company’s shareholder base with the long term financial and strategic direction of the company. Lynge Blak Investor Relations Limited 8 A higher level of “fit” between a company’s direction and its shareholder base leads to optimal valuation, lower cost of capital and lower stock volatility
- 9. The Investor Relations Process -3- Develop the : communication platform to present to the targeted investor and analyst audience Is your IR platform in line with market expectations? Earnings / operations conference call Webcast Road shows Investors forums / blogs New Social Media Industry conferences IR website E-distributions of news Fact sheets / Fact books Company site visits / capital market days Lynge Blak Investor Relations Limited 9 Analyst meetings Sale/traders briefings Financial media Electronic Print Financial press Interviews Trade journals - how to deliver your message to the target audience Investors /buy-side Brokers / Sell-side
- 10. The Investor Relations Process-4- Build relationships with your targeted investors, analysts and financial media audience Do you maintain consistent communications with the marketplace? Do you ensure that the key value drivers are current and obvious to investors and stakeholders overall? Lynge Blak Investor Relations Limited 10 PHASE 1 PR / Media focused Financial PR Analyst meetings PHASE 2 Sell-side focused Earnings releases Conference calls Analyst briefings Industry peers analysis Perception study Ownership analysis PHASE 3 Shareholder/buy-side focused Shareholder value assessment Investment peers targeting M&A analysis Spin off analysis High-tech IR Whichphaseareyouin?
- 11. Why Invest in Your Company? Your company as an investment Business • Industry attractiveness • Key differentiation points • Growth potentials • Corporate, business and operational strategies Financial • Financial goals and strategy Management • Non-financial factors often the major reasons for a company trading at a discount 11Lynge Blak Investor Relations Limited
- 12. How new IR ratings on CSR & Corporate Governance are affecting: Corporate Image Reputation Valuations 12Lynge Blak Investor Relations Limited
- 13. Your Company’s Risk Premium – or Discount Investment professional – both on the buy and sell side – understand the merits of good corporate governance – and take it a step further. If Boards and the quality of corporate governance serve as a type of “insurance policy”, then under modern portfolio theory the market will naturally award a risk premium or discount based on perceived governance quality or deficiencies. 13Lynge Blak Investor Relations Limited
- 14. 14 Optimizing Your IR Program – key elements Capital Markets – where is the money? Shareholders – who owns your stock? Potential new investors – how do I find them? Targeting, Investors in Peers Road shows I-bank or independent? See major investors and potential investors annually Investor feedback – perception work Unbiased? Independent? “Sustainability” / SRI investors / Corporate Governance Continuing and Consistent Investor Communication Further Transparency Website: IR Online / conference calls / contact details Solutions for Sell-side and Buy-side including retail investors Lynge Blak Investor Relations Limited
- 15. 15 Your Optimizing IR Checklist Do your investors see the company as senior management do? Do you know what corporate strategies will cause investors to buy or sell your stock? Who are your real peers and competitors? How does your IR programme compare? Alignment of vision with your investors is one of the keys to building loyalty. Perception studies will uncover issues that take IR into the board room. An ongoing dialogue with the investment community is critical for long term IR success. Lynge Blak Investor Relations Limited
- 16. Measuring Quantitative and Qualitative Goals Lynge Blak Investor Relations Limited 16 • The balance between institutional and retail Ownership Mix Targets • The balance between cross-border markets • Domestic, Asia, Nordic, Europe, North-America, Middle East Geographic Distribution Targets • In general to be avoided, but P/E ratios matching peer’s could be considered Valuation Targets • Measured through surveys Perception Targets • High price volatility perceived as risk factor – however market sentiment has Volatility Targets
- 17. Measuring Your IR Program Frequent reporting to Senior Management– IR Review /Flash Report – •Minimum quarterly updates to the Board Have IR Objectives / written IR Policy & IR Strategy IROs should know: •Who to target •What to say •How to say and how to evaluate Execute well – remember: •”The most important thing is managing expectations……the biggest mistake is failing to meet them.” Lynge Blak Investor Relations Limited 17
- 18. The New Investor Relations Purpose of IR during and after financial downturn • To achieve an accurate valuation • Minimize irrational swings in value in response to new information • IR-Officers need to be “value-centric” • Why are we undervalued? New view of IR – Investor Relationship Management • Implementation of internal valuation process – key value drivers • Optimizing and measuring IR performance - key IR success criteria • Managing internal & external relationships – key strategic IR process Lynge Blak Investor Relations Limited 18
- 19. IR Best Practice in 2011Means… Credible business model and long-term value creation strategy Understanding of investors, markets and insiders’ expectations Investor Relations part of the strategic decision process Wide exposure of management to the investment community Consistent and continuing communications strategy Transparency – simplicity of reporting/communication Ongoing targeting program to optimise liquidity Corporate Social Responsibility (CSR) to be taken serious Regular measurement of impact – quantitative/qualitative Lynge Blak Investor Relations Limited 19
- 20. Lynge Blak CEO Lynge Blak Investor Relations Limited Unit 801, 8/F, Pacific House 20 Queen’s Road Central Hong Kong Phone: +852 6258 6174 E-mail: lynge.blak@lbir.dk 20Lynge Blak Investor Relations Limited
Notas do Editor
- Good afternoon and welcome to our webinar today on Investor Relations Practice in 2011 – Strategy and Value Optimization. My name is Lynge Blak and I thank ArkadinConferencen for the kind introduction and the opportunity to speak to such a distinguished group of investor relations followers in many different locations all over Asia. In 2½ decade I have worked in the field of banking, finance, fund management, brokerage, financial communication and investor relations both as a practitioner for large and small venture cap type of listed corporations – and has a fairly good background to judge what it takes to create that awareness that makes a difference to company valuation, the company’s ability to raise capital on most favorable terms and to deal with crises management in IR – but also to the more fun side of IR. To deal with the company’s level of opennessTo learn about the company’s cultureAnd the deal with the company’s ambitions on its stock listing. The challenge will always be on the basis of above to put together an IR strategy where we take the content of the company’s IR Policy and put into reality. IR Activities that increase the transparency towards the investment community for them to make a fair assessment of the company’s ability to create investment value, and to ensure the company has a communication that is based on continuity and consistency – that create value for shareholders. In recent years has the challenge for IRO increased to a level where our profession has become a natural strategic partner for the management. A function that is reaching its activities into the board of management and board of directors.
- Let me therefore just briefly reminded those of you who may not be as familiar of the terms of Investor Relations that IR is a strategic management responsibility, that…….IntegratesTwo-way communicationAchieving fair valuationIn short should an Investor Relations Program increase and improve:The level of financial communication andEnsure transparency to all stakeholders- and create more value to the company’s IR Program
- Why should the company get use of financial communication to its share- and stakeholders? Well I’m sure you all will have your suggestions and possible in the direction 1) That the Global competition require company’s to be more much visible – also internationally, because that is the market place for our target group global investors and analysts2) That Government regulations to a large extend demand more transparency that only can be achieved with more information3) The Stock market volatility has in recent years taken a significant upturn with the introduction of many new and different investor types and styles – not at least excessive program trading by electronic market makers - a market that some days can represent 70 to 80% of all trading - But we will also have the critics – who would argue that we already have an: Efficient marketAnalytical tools available for as well the sell- and buy side Which ought to make it unnecessary expenditure to have an active IR programI believe in the more fundamental statement that we need to have financial communication and that it should be carried out to ensure that (see above…)
- If we briefly look at the various IR components that we in the IR profession deal with every day – I have outlined four specific areas of IR activity that one way or the other deal with the Disclosure Level and the Business Value of having an IR Program .
- But we also have to remember that in preparing our communication strategy that the IR function is dealing with significant challenge in dealing with a high level of differentiation in both A different audience of internal and external stakeholdersWith a large variety of investor types – that we as IRO have to know the difference of because their investment styles will require difference information and different outreach programs – some like our information from a conventional platform – others are more to an electronic solution – like the one Arkadin offer – supplemented with e-destribution of material and a more user friendly IR Web site like services also provided by irasia.com
- To make sure we in IR deal with the right value creating platform we need to have procedures and guidelines. The company’s IR Policy – which really is a written agreement where the management is dealing with the company’s culture – how we are doing it hire at company XY – including the of openness in our information policy – and to finalize the agreement by creating the platform for the first step into the IR Strategy – how are we doing IR for our share and stakeholders. This is all fine – but the company also need to have an understanding for how the market operate and what it is our financial followers they want of us – their perception of the IR services offered. To know about this – we deal in IR with 4 steps that takes us through the foundation of communication as a value proposition – which ought to be the bible of IR:Before seeing investors we need in the company to determine the investment proposition a company presents – we cannot see investors without knowing what investment style the represent and what they expect from us – their perception. We also need to identify the appropriate audience of investors and analysts We nned to develop the communication platform that service our targeted audience at best And we finally have to build relationships – in Chinese we talk about Guanxi – to ensure we maintain a consistent communication with the market place – and especially make sure the company key value drivers are current and obvious to those who have to evaluate our company – the financial analyst and our investors
- In identifying the ideal investor and analyst audience we take the second step into the value proposition of IR – this time Investor Targeting:If the company manage to find that shareholder base that fit with the company’s financial and operation direction – the benefit would lead to a more optimal valuation, lower cost of capital and lower stock volatility – and I would like to know if this is not what all listed companies aim for? If not there is either something wrong with the perception of been listed on a stock exchange and they should not be there – or the company operate after some different perspectives forced by strong governmental influence – but in these circumstances would even the regulatory regime around a stock exchange require a minimum of attention to the company’s objectives as a listed company. So the value proposition of Investor Targeting is as real as it could be.
- But with difference interpretation of our information message by the vast number of targeted receptions – we have to ask ourselves : is our platform in line with what the market expect? Is it what they see with our competitors – our peers – is it what they would expect from our sector and type of operation that we manage. Remember, have we made or IR Policy public – which I perhaps should remind you is compulsory in many European markets – then we have our own internal guidelines on openness / transparency to follow – should or Investor and/or Peer-Group Perception Survey indicate that we are not in line with expectations- well then we need to look at where there is room for improvements. Where we often see the short fall is of something banal as lack of willingness by many companies to inform on a regular ongoing bases – I’m not necessary here alone talking about the resistance in Asia to report when the numbers are poor or just do not live up to market expectations – no I refer to some more basic resistance. Naturally a conference call, or shall you make it sophisticate with web or Internet solutions – is the main frame in the most listed companies outside Asia – I’m sorry to say we here have a great deal to learn which I’m sure will come by investor demand.
- We have reached our last step in our journey through the Art of Communication Value. We have determined the investment proposition our company present by value enhancing surveys that guide us on the market perception of our company – we have indentified our targeted audience of investors who we now aim to become shareholders that fit and agree to our strategy for the company’s financial and operation directionAnd to make sure we deal with all the differences in the interpretations of the messages we send across we have establish a communication platform that live up the market perception of our sector and company as whole. So we are ready to address the investor market and to build up future relationships with our targeted investors and analysts. We focus on how the company create value – we are in 2011 been more value centric than in previous years - and not at least we ensure in this process that our business strategy is current and obvious to investors and shareholders overall. It sounds easy – but it is not. The reason is: we all come with different backgrounds of information and communication activities. We divide them up in 3 phases – and ask ourselves? –is the platform we have created in our company in compliance with market expectations or due they just about cove the regulatory requirements for our market? What would it take us to move a step up in the communication value chain to create that extra awareness and visibility? It is worth to consider – but remember, there is nothing wrong in been perceived different if that is the company culture and you have reported that in your IR Policy. If your own targets have been meet – you can be satisfied. If you have not meet the market expectations then you have a problem to resolve, for which you require external advice as the sort I provide. You have my contact details and I should be pleased to give you my view.
- But it’s fine we have everything planned in relation to our communication with those who either hold or we would like to hold shares in our company, ideally we should also know why they should invest in our company. If not known it really doesn't matter too much to have a communication platform. What drives the investor to buy shares in your company? Why should they look at your stock as an alternative to your peers? Your investors would look at:How attractive is your industry?How does your company differ from your peers? In which of your corporate, business and operational strategies would you be perceived as been the market leader and a serious investment alternative? Not to mentioned your financial goals and strategy – that is naturally if you do have made your goals and strategy for future earnings public – earnings guidance is naturally a must in this business to be considered the best in class.Finally, the most important of all: the company management – the intangibles including the strength of the management and its ability and success rate to deliver represent 40% of the investor’s estimates of future intrinsic value – in other words: are non-financial factors often the major reasons for a company trading at a discount.
- Recently we have in capital markets with a more mature entry to the use of corporate social responsibility and good corporate governance seen a new type of valuations. This development will continue and strengthen in 2011. IR Officers face a number of difficult challenges in today’s volatile capital marketsAnd one of the hardest – yet potentially most rewarding challenges – is to understand the new types of valuation tools being applied to research analysts and portfolio managers who feel they have been let down by traditional analytics. To that end, IROs who looking to make a difference in the company will want take a look at corporate governance ratings and research reports, and understand how they are affecting……Corporate Image – Company Reputation and the company’s valuation. But there are some uncertainties - As it is a relatively new field, it is not a surprise that there is some uncertainty among corporate issuers about corporate governance research and ratings in general.How are they calculated? What is the basis of their methodology? The most IROs have historically seen the corporate governance activity among institutional investors as a legal or compliance function, as proxy voting was most often handled within legal or compliance - and often by the corporate secretary. But things are evolving; proxy voting is now increasingly based on analyst concerns and not just compliance policies. This open up and place further challenges on the ambitious IRO who want to make a difference.
- Investment professional – both on the buy and sell side – understand the merits of good corporate governance – and take it a step further.If Boards and the quality of corporate governance serve as a type of “insurance policy”, then under modern portfolio theory the market will naturally award a risk premium or discount based on perceived governance quality or deficiencies. If the Board of directors and Management and their ability to deliver good quality of corporate governance serve as a type of “insurance policy”, then under modern portfolio theory the market will naturally award a risk premium or discount based on perceived governance quality or deficiencies. And here will the IRO be able to make a difference in 2011 and the future: We already see how discount rates will be adjusted via a capital asset pricing model (CAPM),Meaning that Better governed / higher rated companies or those with improving corporategovernance will enjoy a lower cost of capital, lower stock price volatility and higher valuations ofthe company’s shares compared to companies with questionable or deteriorating corporategovernance practices and governance ratings. The advanced IR Officer will notice that we on this valuation model is dealing with valuationparameters that is close to those we internally in the company use when we measure our effort on asuccessful Investor Targeting strategy.
- But as Investor Relations ought to be taken serious in the company value chain – we also individually need to ask ourselves: do we deliver what is expected? It I wanted to be considered as one of those who are been offered incentives like warrants or options – should the company not be able to measure me and my departments performance?Or if the ambitions “only” is for own personal pleasure – which is equally applaud able – then why not have a set of Quantitative and Qualitative Goals that could be used as guidelines.
- A set of dedicated documents to conduct your quantitative and qualitative capabilities is one and important aspect to your possible annual measurement - which shall form the platform for your appraisal discussion with your superior and in conjunction herewith your annual round of budget talks. However, equally important – if not more – is your ongoing reporting to those in the organisation that rely on your market insights and judgments of aspects to your profession as IR responsible. The Board of Management and Board of Directors. Have your IR Objectives well founded in your IR Policy and IR Strategy material:develop an effective two-way communication process between a listed entity and the financial community working in accordance with the regulatory regime(s) governing financial markets both domestically and internationally managing the dissemination of financial, strategic and legal information Deal with your audience of stakeholders, including existing and potential institutional and retail investors, financial analysts, stockbrokers, regulatory bodies and the financial media communication with international as well as domestic shareholders Communication should be carried out to ensure that: all investors have the information necessary to enable them to become fully and fairly informed about all material information, enabling them to make reasonable investment decisions Importantly is as a snap shot to knowWho to targetWhat to sayHow to say and to evaluateBut also remember to execute well:
- What has changed in the IR since last year and the year before: and what about 2011The financial crises has had a significant impact on the valuation of companies. Some have managed pretty well – others and in all those with the least transparency – have been suffering to achieve an accurate valuation. Volatility has become an issue for many – volatility in stock price and in turnover are however here to stay – the development in the market with many more different entries of program and day trading conducted by electronic market makers have made a significant impact to the market performance. No single entity can change that – learn to live with it – But make sure you on the conventional communication never forget that investors are looking for value – and the lack of visibile value in some companies or sectors has been a big issue –therefore back to the fundamentals – why are we undervalued. The new IR is challenging – and I se much more the concept as we already see in the mainland China – the concept of Investor Relationship Management. With value as main focus we need to implement an internal process that takes the subject to the Board level – and make sure the key value drivers are current and obvious to investorsTo beet the crowd – your competitors – look at how to optimize your IR program and not at least how to measure – make sure your IR success criteria are been followed and give internal guidance to your expectations And take that internal and external responsibility to manage the company’s financial relationships – it is a key strategic process – and as professional IR Officer you have the leading role to take that as your responsibility.
- We make a summary and remind our self that in 2011 IR best practice shall be all about…..