Friday, August 17, 2007

Thai companies with good investor relations

Asian companies with good IR

ALEXANDER JAMES WOOD

This is the eighth in a series of articles about investor relations (IR) in Thailand and how listed companies can develop best practice IR programmes.

In previous articles, I have covered several aspects of how companies can develop "best-practice" IR programmes (from the principles of effective communication, to the importance of websites and communicating bad news honestly). The companies that get these things right generally achieve meaningful share prices - and the respect of the investment community.

In my work with clients, I see extensive feedback from investors about what kind of IR they like and what kind of IR turns they dislike. The recommendations in my articles have been based on this experience - but there are also many publicly available independent surveys conducted by magazines and research agencies that gather and analyse investor feedback and that rank listed companies in relation to the quality of their IR.

The better known ones (in Asia) include IR Magazine, Asia Money, Finance Asia and Institutional Investor. The rankings tend to be based on surveys of a hundred or more investors and analysts, with points attributed to companies nominated by respondents. The results of the rankings vary, but the following is a selection of Asian companies that tend to rank first or second in the main surveys (the magazines shown in brackets ranked the company mentioned "first for IR" in its local stock market in 2006):

- Thailand: Banpu (AsiaMoney), PTT (FinanceAsia).

- Hong Kong: Sun Hung Kai Properties (FinanceAsia, AsiaMoney; Asian property sector, Institutional Investor).

- China: Sinopec (SOE, IR Magazine; AsiaMoney), China Vanke (non-SOE, IR Magazine).

- Singapore: SingTel (IR Magazine), DBS (AsiaMoney).

- Korea: Samsung (AsiaMoney, FinanceAsia).

- India: Infosys (AsiaMoney).

- Taiwan: Acer (AsiaMoney), Taiwan Semiconductor (IR Magazine).

So what is it that investors like about these companies' IR programmes? IR Magazine's Investor Perception Study Asia 2006-07 (conducted by TNS, based on a survey from the third quarter of 2006) includes anonymous quotes from investors that give you an idea:

- China Vanke: "Pro-active investor communication"; "information disclosure is transparent - it gives the feeling of being reliable"; "The IR team is always available"; "The [annual] report reaches international standards, explaining in detail the current state of affairs and future objectives."

- Sinopec: "The company is receptive and responsive"; "easy access to management"; "Chen Tonghai [CEO] is friendly to people and sounds as if he knows his business. He has a very Western style"; the annual report is "clear and comprehensive"; "Meetings are very thorough and have good Q&A periods."

- Taiwan Semiconductor: "The company's financial position is transparent"; Elizabeth Sun, the IR officer has "a thorough understanding of the company's future development plans"; "It holds investor conferences regularly and information is updated all the time"; "respect for shareholders"; "The different sections of the website are well arranged and easy to find your way around."

- Sun Hung Kai: "We see a lot of directors in the meetings and have face-to-face interaction. The directors are willing to take questions and if they cant answer themselves, they get other staff to find the answer for us"; "she [Orlena Wong, IRO] takes the trouble to reply to our e-mails."

- DBS: "you get quick replies from the IR team"; "the management team is very accessible"; "accessible through all mediums - telephone, email and direct contact"; "Jackson Tai [CEO] is very consistent in communicating with shareholders, whether times are good or bad. He doesn't only show up when results are good."

The themes are familiar: proactive and interactive communication, responsiveness, accessibility, transparent disclosure, clarity, consistency, explaining strategy, attention to websites and key IR materials and being honest about bad news.

I asked the IR officer (who wishes to remain anonymous) of an Asian company ranked first for IR in its local stock market what he thought constituted "best practice IR". This is what he said:

"I feel a lot of Thai listed firms are not serious enough about the value of IR. Most see IR merely as a provider of corporate information to the public. Others mistakenly believe good IR is about achieving consistent increases in share price.

"I think IR success is really about making the share price aligned with the company's 'intrinsic' value. Being a good IR officer involves:

- Being very knowledgeable about your industry and company.

- Knowing what, how and when to communicate.

- Being ethical and service-minded. IR is not a revenue-generating unit for the company, but is always a proxy for the quality and professionalism of management.

"I think the most challenging task of IR, is extracting viewpoints from investors and shareholders. This provides valuable input for senior management. The key to success is building strong relationships with investors. Investors today are very smart and their thoughts are too valuable to overlook."

The next and final article will argue that Thai listed companies get the share price that they "deserve".

Alexander Wood is a director of two strategy consulting firms: AWR Lloyd (energy and metals, Asia) and PYI-Op8 (other sectors, Thailand). He can be contacted at wood@awrlloyd.com and wood@pyi.co.th.

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