The Business Times – Thursday, 19 February 2009

Managing investor relations during tough times

By LAI KWOK KIN

AS WE enter the peak financial reporting season, a strange silence seems to have descended on
Singapore's corporate firmament. There is none of the usual race to be among the first to release
results for the 2008 financial year (ending December).

Neither is there the mad scramble for venues for investor briefings
which take place each February. Meeting rooms are half-filled, if not
empty, and RSVP lists for analysts and fund managers are shorter.
Financial markets
around the world Financial markets around the world have changed dramatically since
have changed October, and the effects are trickling down to local corporations as
dramatically since they present their scorecards for what happened last year, and ponder
October, and the an uncertain future.
effects are trickling
down to local A main reason for an initial public offering (IPO) is to tap the capital
corporations as they market for funds. Listed companies compete for capital, each vying to
present their offer a better value proposition, with the hope that this will translate
scorecards. into a higher share price. This impulse propels the efforts to raise
investor awareness through public announcements, corporate
presentations and to court stock analysts, fund managers and the
financial media.

Until now, the mantra uttered in forward-looking statements and media

releases has been chiefly to hint at future earnings growth. The most commonly used benchmark
remains the humble and sometimes over-used price-earnings multiple. Stock analysts study the
financials and eyeball management to assess how net profit in the latest quarter or financial year
compares with the same period a year earlier.

For directors, chief financial offices and investor relations consultants of Singapore Exchange
listed companies, the preparation of the few paragraphs about the future prospects (Note 10 of
Appendix 7.2 of the Listing Manual) is a time of agonising and careful scattering of tea leaves for
the pundits to decipher.

Net profit - further drilled down to earnings per share - of the past period and projected forward by
the market allows an investor to compare historical and forward price-earnings multiples. Based
on the current share price and relative to comparative companies, Mr Market then decides
whether to buy, hold or sell.

Of course, many would say that savvy investors don't just look at earnings multiples but also
price-to-book and cash flow comparisons. But in the main, the major determinant of a share price
- and indeed of IPOs and reverse takeovers - has been and remains the arithmetic of growth
relative to share price.

But with a financial storm across the globe and corporate Singapore battening down the hatches,
what should companies do and say?

First, don't avoid the market. Some owners of listed companies faced with write-offs and a weak
outlook tend to avoid meeting investors and analysts - presumably to save face and avoid the
agony of explaining the dismal numbers. To do so will only prolong any rise in the share price
when markets eventually recover. Facing the music maintains trust - a precious commodity in
these uncertain times - among investors.

Second, it may be unwise to give specific guidance this time around. Asian companies tend to
limit forecasts, if at all, to whether profit in the coming year or quarter exceeds the previous
corresponding period. However, such blandishments may be unwise as they may not be believed
in the current scenario; even the experts have been wrong about how quickly and savagely this
downturn has come in the last few months.

Third, in the current climate, liquidity is more important than earnings growth. Cash flow and
access to credit are paramount. Investors want to know how a company is enhancing cash flows,
reducing accounts receivable days, cutting costs and that its banking relationships are good.

Fourth, corporations need to spell out how their businesses are being retooled to survive or thrive
during and after this financial Armageddon. Investors expect management to articulate clearly
how they are adapting to the new environment beyond the usual pronouncements of cost-cutting
and tighter credit control. The market expects consolidation, swift disposal of non-core assets and
will even welcome mergers and acquisitions to strengthen the value proposition.

Finally, companies need to convince or at least remind investors of the quality of their
management. These difficult times test the will, resolve and capability of top managers. These
few good men and women must display the ability to reduce costs, secure new customers,
convince creditors and even redefine their businesses.

As this market recovers, the rising tide will not lift all boats - only those which thrived despite the
storm and dared to be noticed.

The author is a former journalist and securities analyst, and founder and managing director of
WeR1 Consultants Pte Ltd, which provides investor relations services for listed companies