Introduction of Financial PR IR survey & 3 key findings
1) IR Survey findings:
The Straits Times Index (“STI”) has plunged more than 20% since hitting this year’s peak in April. Recently, the benchmark index has also broken its critical 3-year support level of 2,800 points. Global uncertainties have contributed to many analysts expecting further weakness in the STI and turnover volumes to taper off substantially in the near term. Is Singapore’s financial market really in the doldrums?
According to Bloomberg’s data in the past 12 months, Singapore has generated 221 deals aggregating S$12 billion in value. Neighbouring countries with major stock exchanges like Malaysia and Indonesia generated lesser transactions and values in the same period. In comparison, Singapore has come out top in the region.
Total Number of Completed Deals and Value in the Region
From 1st October 2014 – 1st October 2015
Responses were collected from a group of 76 SGX-listed companies during the first half of 2015. The participants ranged from Large Caps (market capitalization of more than S$1 billion), Mid Caps (market capitalization of S$300 million to S$1 billion) to Small Caps (market capitalization of S$300 million and below). The sample size closely mimics the total population of listed companies based on the percentage of representative market capitalization.
The 3 key survey findings uncovered are:
1) Analysts Unlock Higher Valuation and Liquidity for Companies;
2) Attracting Institutional Investors seen as No. 1 Importance for IR activities;
3) Small caps Spend More than Mid caps in terms of their IR Budget.
1) Analysts Unlock Higher Valuation and Liquidity for Companies
Companies are surveyed based on which IR activity they perceive derive the most effect on their valuation and liquidity. Overall, 57% of the respondents believed that analyst briefings are instrumental in helping them to create interest in the market and thereby improving their share price valuation and liquidity. The more frequent the companies organize such briefings with analysts; the more effective the result it has on their valuation and liquidity according to the chart 1.7. Therefore, we can conclude that conducting analyst briefings represent the most effective IR communication tool as per our survey.
“Through primary research, we undertake a vigorous process to discover undervalued stocks by valuation screens, company meetings, site visits and industry analysis. However, there are still certain inefficiencies in the form of information gap between listed companies and their investors. Listed companies who are more proactive and forthcoming in their IR approach would allow analysts to better understand and appreciate their business strategies, directions and decisions and that in turn would help analysts in performing their role. This is extremely critical in the formation of the share price discovery process,” commented Mr Andrew Chow, Head of Research of UOB Kay Hian.
A significant 100% of Big Caps conduct analyst briefings regularly. Thus, Big Caps are very well covered by both local and overseas based investment analysts. Currently, 82% of the Mid Caps conduct analyst briefings while 18% chose to conduct none at all. Notably, 65% of the Small Caps organize analyst briefings from time to time while the remaining 35% do not. Perhaps, this helps to explain their focus in gaining more media coverage and subsequently analyst coverage in the long run. At the same time, majority of the Small Caps faces certain challenges in gaining analyst coverage. About 50% of the participants think that the main reason is either capitalisation or trading liquidity are too low to appear under the radar of the analysts. This brings us back to the question why Small Caps are much more willing to spend and gain coverage.
2) Attracting Institutional Investors Seen as No.1 importance for IR Activities
The key objectives of listed companies vary across Big Caps to Small Caps. 50% of the respondents believed that attracting institutional investors are important in their overall IR strategy. Contrary to popular beliefs, only 36% of the listed companies surveyed rank ‘attracting retail investors’ as an important objective.
Big Caps are more active in conducting adhoc investor meetings and teleconferences more than 8 times annually. Big Caps have a large following of index-linked funds, unit trusts, exchange traded funds (“ETFs”) hedge funds and other institutional funds etc. Most major funds have a self-enforced market capitalization mandate to invest in SGX listed companies. Therefore, it is imperative for companies seeking institutional investors to maintain a certain market capitalization size and trading liquidity level. On top of that, 73% of the Big Caps have hosted a minimum of 1 to 4 company site visits for the analysts and funds.
“Yangzijiang has always kept high focus on timely dissemination of information and has maintained high standards of transparency, disclosure, IR and communications. We work with FPR to regularly host analyst briefings and also engage institutional investors so that the market is regularly updated on the company’s progress. We feel that meeting analysts and investors and addressing all their concerns regularly is highly essential as we want the correct message and the relevant facts to be known to the market in a timely manner. Our Chairman and CEO make the effort to fly to Singapore at least once a quarter and attend the company’s quarterly results briefings, road shows, media interviews and investor meetings. We intend to keep this tradition on-going and hope that the market will continue to appreciate our IR efforts,” commented Ms Liu Hua, Chief Financial Officer of Yangzijiang.
Furthermore, 42% of the participants yearn for more media coverage. Amongst the respondents, 76% of the Small Caps conduct at least 1 to 4 media interviews per year to drum up interest in their respective companies. Getting more publicity in mainstream media from time to time can be instrumental in promoting the company to analysts and investors who have not heard about the company.
3) Small Caps Spends More than Mid Caps
By comparing the annual budgets on IR, Small Caps tend to spend more than the Mid Caps. Interestingly, 64% of Mid Caps spend less than S$50,000 per annum while 59% of Small Caps spend more than S$50,000 per annum in their quest. This is primarily due to Small Caps placing a high emphasis on gaining media coverage to improve their companies’ market capitalization and trading liquidity. Some Small Caps would also like to create more awareness for their company’s brand and image through more publicity. Small Caps generally has a desire to gain more recognition as compared to their larger peers. On the other hand, Big Caps naturally has bigger budgets and spend the most among listed companies for their IR activities. 54% of Big Caps spend more than S$100,000 per year in conducting IR activities! In contrast, Mid Caps remained lukewarm in their approach towards effective communication to the investing community.
Financial PR Team SG