Every time I return to Shanghai I find the skyline has zoomed skyward – much like Asia’s investor relations. ‘The depth of the profession and the companies – it’s something to behold, and tonight’s event reflects that,’ says Hamish Bell, co-founder of the Investor Relations Association Asia (IRAA).
Bell is talking, of course, about the IR Magazine Asia Awards, at which some 250 guests celebrated the region’s best investor relations at the Four Seasons Hotel in Shanghai on November 20. IR magazine commissioned Taylor Nelson Sofres HK to survey 482 portfolio managers and analysts in ten Asian countries, identifying the companies with the best IR and studying the views of investors and analysts. The research is part of a series of surveys IR magazine commissions in the US, the UK, Canada, Latin America, the Eurozone, South Africa, Australia, the Nordic Region, Central & Eastern Europe and Ireland.
Bell admits IRAA hasn’t really taken off yet. ‘We’ve taken a few walking steps,’ he says. ‘Now it’s time to get serious and run forward. We will relaunch the association in January with a high-level advisory board, and we plan to introduce education and accreditation modules for members, providing more support to both newcomers and experienced professionals in the region.’
Tough times
The last year hasn’t been easy for Asia, mostly because of Sars. Anxiety about the disease curtailed equity issuance and M&A, as well as company operations. ‘There was such stasis for a few months; Hong Kong was like a ghost town. But now it’s a whirlwind of economic activity,’ says Angela Mackay, Asia investment editor in the Hong Kong bureau of the Financial Times. The paper had, unluckily, begun a major push in the region just as Sars began spreading.
‘The whole market was driven down by pessimistic sentiments about the Sars outbreak,’ notes James Liu, general manager of APS China Research. ‘But many industries – like toll road operators and textile manufacturers – were unaffected. We quickly arranged conference calls with CFOs and IROs to confirm this was the case and then included it in our research.’
The winner of the grand prix and best crisis management awards, Cathay Pacific Airways, responded quickly to the Sars crisis. As air traffic fell by two thirds, the carrier, which had one of its best years ever in 2002, rapidly cut capacity by 40 percent. China Southern Airlines, in contrast, angered investors by at first seeming to take advantage of the confusion to expand, and then doing an abrupt about-face and canceling its new routes. ‘Cathay was in good communication with the market over the impact of Sars,’ notes the Asian Wall Street Journal’s managing editor, Peter Stein.
Cathay usually provides monthly traffic and capacity numbers a week or so after the month end. But during the Sars period it began publishing details of flight cancellations as soon as the decisions were made. Cathay also holds twice-yearly results meetings and other ad hoc briefings. ‘But we didn’t have to do this during Sars because we published so much data the analysts didn’t need to come and meet us,’ explains Tony Tyler, director of corporate development for Cathay. ‘Anyway, many of them wouldn’t have been allowed to travel to do so.’
Because of Sars, Cathay had the biggest half-year loss in its history – HK$1.24 bn ($159 mn) – a far cry from 2002’s net profit of HK$3.98 bn. But by August, when the first-half loss was announced, the post-Sars recovery was well on its way.
World leader
While Cathay took home the grand prix, Singapore’s DBS Bank won the most trophies. According to Tony Raza, head of IR and corporate planning for DBS, the bank could be a winner anywhere. ‘The US used to set the standard for corporate governance, but we like to believe we can do better,’ he declares. ‘On all the major fronts of corporate governance, DBS and Singapore as a whole are becoming leaders. The principles of Reg FD were already part of the Singapore Stock Exchange rules, and we have also been adopting Sarbanes-Oxley issues.’
DBS recently started webcasting quarterly briefings. ‘I did wonder whether it was a useful medium,’ Raza recalls. ‘But we have been getting a lot of positive feedback from analysts and investors using the webcasts. We even have analysts who don’t come to the briefing but instead watch it on their PC while they’re updating their models.’
Raza says DBS has been focusing on basic, routine communications during the past year’s market slump. ‘For example, there was an investor conference in New York in the middle of the Sars crisis, and the organizers were telling us US investors were not very eager to meet with companies from Singapore,’ he comments. ‘But our CEO went and demand to see him was very high. Everybody wanted an update on what he was seeing in Asia – and there were few other Singaporean corporates who had gone out to the US.’
Another Singaporean company, United Overseas Bank, won the award for most improved IR – kudos to a new IR team only assembled in 2002. The reason for creating the department, explains IR head Iris Chua, was UOB’s acquisition of Overseas Union Bank in 2001, creating Singapore’s largest bank. ‘There was keen interest from investors and senior management became passionate about communicating with them,’ Chua says.
She goes on to say that her long history at UOB – running retail investment sales and working as the CEO of one of UOB’s finance companies, for example – has helped her with IR. ‘Having managed the business side, I have a good perspective on what’s happening in the entire bank,’ she explains. ‘It gives investors a level of comfort to know they’re talking to someone who’s in tune with the business, rather than just a PR person.’
UOB has developed a good understanding of its shareholder register since starting its IR department, and it uses e-mail alerts to keep investors updated. ‘But we put a lot of stress on direct, one-on-one communications with investors,’ Chua concludes. ‘It makes for more meaningful interaction.’
Multitasking
In a new category for 2003, real estate company China Vanke, which has B-shares listed on the Shenzhen Stock Exchange, won best IR by a small-cap Chinese company. Vanke’s head of IR, Shirley Xiao, also handles PR, media relations, customer and market research – all extra responsibilities which, she says, help in her IR work. She reports directly to the chairman and CEO, and insists it’s their enthusiasm that has made Vanke’s IR program a success. ‘Their backing makes it much easier for IR to get support from the rest of the managerial team and the operations departments,’ Xiao says.
By Chinese standards, Vanke’s corporate governance is truly exemplary. The company has separate people in its chairman and CEO roles, and its lean, eleven-member board includes four independent directors. And this board listens to small shareholders, Xiao insists. In 2000, when China Resources Group acquired around 8 percent of Vanke, the board canvassed investors before deciding against issuing extra B-shares to CRG. This year a corporate bond offering was fine-tuned after investors were consulted. Some shareholders even posted their opinions on Vanke’s web site bulletin board.
Samsung, Korea’s number one IR performer, has also been focusing on corporate governance. ‘We have instituted our own version of Reg FD and many parts of Sarbanes-Oxley are being adopted,’ says Samsung’s IR chief Woosik Chu. ‘Also, we’ve been expensing our stock options since 2000 – well ahead of most US companies.’
Samsung hasn’t expanded its 20-strong IR team but the department’s ‘energy level’ has shot up over the last year, along with the company’s stock price. And while the proportion of foreign shareholders held steady at nearly 60 percent (even without a US exchange listing), the number of shareholders jumped as fund managers balanced their portfolios. Chu says Samsung’s new investors include more global funds rather than emerging markets funds.
Another growth story is Hong Kong’s Li & Fung, which won best communications during a takeover. Since its first major acquisition of Colby Group in 1995 nearly doubled turnover, deal after deal has helped Li & Fung grow to $5 bn in revenues.
Acquisitions are a key part of Li & Fung’s strategy, so IR manager Nancy Chen works closely with the CEO and the acquisitions team. Take the December 2002 acquisition of International Sourcing Group, for example. ‘Foremost in our mind were the analysts,’ Chen says. ‘After the HK market closed at 4 pm, we sent a press release at 5 pm announcing a conference call at 7 pm. That way analysts could call their international salespeople and they’d be ready for the next day’s trading.’ As one respondent to the awards survey said: ‘Li & Fung provides sufficient information to investors on every M&A deal.’
Topping the league
Elsewhere in the region, Infosys, a custom software and consulting company, once again topped India’s league table. Besides first-class IR, investors have good reason to be happy – Infosys recently boosted this year’s sales forecast from around $950 mn to more than $1 bn.
‘Even with the hue and cry in the US and Europe about technology outsourcing and the impact on the economy, we’re still steadily increasing our business in those regions while expanding in Asia-Pacific,’ explains Infosys’ business development manager Hiren Doshi.
His role developing new customer accounts now demands a lot more involvement with the IR team. ‘When I introduce Infosys to a new client, I have to prove our credentials,’ he comments. ‘That doesn’t come just from our technology; it has to come from our financial strength and transparency. I work with our IR and financial teams to gather information that I can feed to my customers.’
Alfonso Reyes, head of IR for Philippine conglomerate Ayala, reports both to the head of the corporate strategy group and straight to the CEO. This is different than many Philippine companies where IR is often part of PR, and Reyes’ top-level position helps when he has to explain the Philippines’ well-publicized troubles to foreign investors.
‘Of course investors have obvious concerns,’ Reyes says. ‘But most of the tumultuous events have happened in the south, far from the financial centers. And other than their effect on investor perception, they have zero impact on a company like Ayala.’
Naturally these award-winners are justifiably proud of their IR performance. But don’t just take their word for it. Almost 90 percent of the nearly 500 investors and analysts who voted in the survey say Asia-Pacific IR has improved over the last year. Now that’s championship status.
