06 October 2007

Yusli: Investor relations foundation of market

Firms need to engage funds, analysts, investors and media

KUALA LUMPUR: Delivering a great set of financial results is welcomed by all shareholders but that might not be entirely sufficient for a company to realise its true valuation.

Relationship building with fund managers, analysts, investors and the media, or investor relations (IR), is equally important to attract the global pool of investment money to a company.

“IR is the foundation of the market. We can’t have a vibrant, dynamic and interesting market if we don’t have IR,” Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff told a media briefing yesterday.

“While we may have very good companies here, if they do not profile themselves properly then the chances of them attracting the attention of analysts and global fund managers won’t be there,” he said.

Bursa recently launched an IR manual and helped sponsor the Malaysian Investor Relations Association (MIRA), led by Justin Leong, Genting Bhd's head of strategic investments and corporate affairs.

Yusli said the role of IR was an important element of a listed company’s operations and more emphasis should be placed on such activity post-listing.

“Companies don’t have much of an idea what happens post-initial public offering. Coming to the market is the beginning of the journey, not the end,” he said.

Leong, who was at the briefing, said IR was a long-term process involving the timely representation of facts, and since there was a lot of competition for investment money, maintaining a profile was important.

“Malaysia has a great number of companies but sometimes we do not market ourselves as effectively as we can,” he said.

Leong said making voluntary disclosure and giving timely information, be it good or bad, and being in constant communication with the investment market was an important element in building trust and sustainable value in companies.

“There are 12 members on the MIRA board and each member will adopt a few companies and take them through the process of developing an IR programme,” he said.

The association has 129 corporate members and aims to create a larger network of people in IR. It has held four seminars, which were attended by over 200 people.

Yusli said Bursa Malaysia (the listed company) had found IR to be a rewarding process.

“When we listed in 2005, the analysts in Malaysia had never known a listed stock exchange. Meeting them one-on-one and in roadshows was important to explain what Bursa was about and how to go about valuing a company like ours,” he said.

Yusli said if companies came to the market and expected the market to properly value them without explaining their business models and growth prospects, there might not be proper valuation or appreciation of their business.

“With proper IR, there is a fair chance of getting a proper market valuation, which will help give the company better access to capital,” he said.

Bursa Malaysia also tried to bring IR to more companies through its Capital Market Development Fund-Bursa Malaysia Research Scheme (CBRS). Before the scheme's launch, Bursa Malaysia estimated that just 10% of the market attracted consistent analyst coverage.

Yusli said under the CBRS 2 scheme, Bursa Malaysia was targeting another 200 companies for coverage. He hoped a third of the companies listed on Bursa would be regularly covered.

He said one reason some listed companies were afraid of IR was the fear of being queried for information released to investors and the media.

“There are a lot of things you can say within the rules and they are not going to result in us querying the company. As far as we are concerned, as long as it keeps to the facts and does not result in excessive speculation in the company, it’s okay.

”Companies must come upfront and disclose first before the market starts hearing it from other sources,” he said.

Apart from issuers, Yusli also hopes analysts and fund managers would engage more listed companies for coverage.

“We as a listed company meet more foreign fund managers and foreign analysts than local ones. You do have to ask yourself what’s going on. “These people are willing to travel from London, New York or Hong Kong but the ones here do not come and visit us. What are the local ones doing?”

Both Yusli and Leong said IR was not public relations as there was a fundamental difference between the two.

“PR is promotional. It is supposed to tell all the wonderful things about the company. It’s a sell job,” Leong said.

Analysts, fund managers and the media would look at the numbers and companies would have to explain them, he added.

This article appeared in The Star StarBiz on 6 October 2007.