Necessity of the thesis
When being listed on the stock exchange market, the company must comply with the laws and regulations of the stock exchange market as well as overall legal framework These regulations may vary from the disclosure of information to production of particular financial statements As a result of all of these compulsory tasks and the active promotion activities of companies, a new business area has been created - Investor Relations (IR) In other words,
IR is a job that has only recently appeared in Vietnam - it is the activity of listed companies to create a 2-way communication with investor communities
Vietnam stock market is in the early stage, in many listed companies, IR activities are just disclosure of basic information and investors‟ rights fulfillment
The stock market in the world has a much longer history and IR activities is the way to achieve purpose of the company when listing in the stock market – capital competing
Therefore, it is necessary to research theoretic, models of IR activities to apply to Bac Viet Steel which listed in Hanoi Stock Exchange (HNX) with stock code BVG, in order to build up an effective IR strategy and program, which will contribute significantly to the overall strategy of Bac Viet Steel in the near future This is the reason that the author chose this topic:
“BUILDING AND IMPROVING INVESTOR RELATIONS
THE CASE STUDY OF BAC VIET GROUP”
Research aims and objectives
The aim of this thesis is to (1) propose a suitable model for an IR division, (2) propose a model to implement IR activities, (3) and give some recommendations to enhance the current IR activities in Bac Viet Steel The ultimate aim of this thesis is to make the IR activities in Bac Viet Steel more professional and efficient, achieving international standards In order to do that, there are some objectives that should be reached:
Thoroughly research current theories of IR activities, including: models of constructing the IR division, models of implementing IR programs and IR tools
Analyze Bac Viet Steel‟s current IR activities and define its strengths and weaknesses
Give recommendations to Bac Viet Steel for the organization of its
IR division, implementation of its IR program and improving its IR activities in general.
Research questions
To fulfill the objectives of the study, the following research questions need to be answered:
How to improve Bac Viet Steel‟s IR activities to support the company‟s strategy?
What is a suitable model to organize the IR division in Bac Viet Steel?
What is a suitable model to implement an IR program in Bac Viet Steel?
What should be done to implement IR program in Bac Viet Steel to make it more efficient and support the general strategy of Bac Viet Steel in the future?
Scope of study
A joint stock company who wants to list on stock market has to meet many strict requirements as well as fulfill many duties by the regulations To maximize its shareholders benefit and competitive advantages, it not only meets the regulation but also makes higher effort by Investor Relation activities This study is conducted in the scope of Investor relations of listed companies It is planned to implement deep analysis on the case study of Bac Viet Steel JSC which listed on Hanoi Stock Exchange.
Data Sources and Processing
This thesis uses both secondary and primary data sources The secondary data come from related studies on investor relations, studying books, articles, online documents and so on The secondary data also come from reports, news-letters… from Bac Viet Steel The primary data come from direct interviews with company management, staffs of Bac Viet Steel
The interviews are also conducted with shareholders, analysts… in Hanoi Stock Exchange The list of interviewees shall be detailed mentioned at the end of this thesis.
Research method
This study is a research which applied qualitative (descriptive) method
A review of related literature/documentation is carried out to understand the concepts, the process and procedure of building and improving investor relations strategy and program of a listed company The qualitative method is also through interviewing relevant persons Questions will be developed and structured interviews are conducted.
Significance of the study
This study shall contribute to the body of knowledge and understanding on IR including: the concepts of IR, models of organizing an IR function, models of implementing IR programs and many IR tools that are widely used in the world now It also helps Vietnamese enterprises enrich their knowledge on IR for better application in cooperation with business activities
It also could be a good reference material for leaders and the Investor Relations Office (IRO) of Bac Viet Steel
The thesis also provides the recommendations that are applicable to the current IR activities of Bac Viet Steel: the models of organizing the IR division, the way to implement IR programs in Bac Viet Steel and some suggestions to improve the IR activities in Bac Viet Steel in order to obtain the aims and objectives of an investor relations strategy and program.
Limitations
This study focuses on Investor relation with analysis only on Bac Viet Steel case study and use data available in 2012 The study is planned to conduct within the duration from 6 months to 1 year The time constraints may have some impact on the findings and the quality of solutions.
Expected Results
The study will give a better understanding on the IR definition and its elements as well as the program of IR activities Moreover, recommendations to Bac Viet Steel Investor Relations activities are at the chapter three of the study.
Short introduction
The thesis is composed of 3 parts:
Chapter 1: Literature review of IR activities Chapter 2: The current situation of IR activities in Bac Viet steel Chapter 3: Solutions to enhance IR activities in Bac Viet steel
LITERATURE REVIEWS OF INVESTOR RELATIONS
The concepts of investor relations
Along with the history of the development of stock exchange market, IR concepts is more and more developing, and more and more paid attentions by companies and enterprises, especially those who are quoted These days, IR is going beyond its theoretical meanings It is also an art in the modern business and management There are different definitions on investor relations and none of them has a dominant acceptance among analysts and theorists Two of them, which are widely used as practical guides on investor relations, are:
“Investor relations is the communication of the relevant and necessary information by which the investment community can consistently make an informed judgment about the fair value of a company’s shares and securities.” - Investor Relations Society, UK (The Hong Kong Institute of
Chartered Secretaries, Guidance Note - A practical guide to good governance)
“Investor relation is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation.” - National Investor Relations
Institute, US (The Hong Kong Institute of Chartered Secretaries, Guidance Note
- A practical guide to good governance)
According to the above definitions, investor relations is the term used to explain all the activities of an organization or a company communicating with all kinds of investors However, for each kind of investors, specific communication tools are designed and used for the organization or company to gain better understanding and efficiency about the organization‟s or company‟s business strategies and activities, management, financial performance, and also the future of the organization or company This, actually, is two-way communication between the organization or company and its investors “Investor relations is a dialogue as is as much about companies explaining their business to the investment community as it is about companies listening to the views and feedback from that very group.” –
Investor relations, a practical guide, London Stock Exchange (2010)
As the nature of investor relations is about explaining to investors and listening to their feedback, investor relations is seen as a long-term process, not an occasional activity
1.1.2 The benefits of investor relations
According to these above definitions of investor relations, the objectives of investor relations are not only about company explaining their business to all kinds of investors but also about company listening to the investors‟ feedback The benefits of investor relations are clearly defined in three aspects as following: access to capital, liquidity and fair valuation
The first and foremost method to measure the importance of investor relations of a company is the raised capital The two-way communication between the company and their investment community shall lead to ways of accessing capital The more efficient and cost-effective access to capital is, the more successful the investor relations is
Besides access to capital, another purpose that listed companies like to reach through investor relations is attracting liquidity from their investor relations activities, or, in other words, increasing the frequency of financial trading in investors‟ shares Once the investment community understands the company, and relying on the availability of their shares, through the investor relations, sellers and buyers can be attracted with pools as well as trade at greater frequency of their shares
Furthermore, one of the chief objectives of investor relations is fair valuation of the company, which is expressed by share price Proper communication with investors shall assist company in informing their own achievements and breakthroughs It also assists company in the understanding of market evaluation process and the status of share price in the market as well as the status of the company in the market (comparing to other share prices) Actually, a well-executed, carefully planned investor relations program can help a company to improve their ability to achieve fair value
And fair market valuation is what companies should seek
Investors of a company come in very various shapes and sizes with various requirements and needs, investment manners and behaviors Thus, it is of much importance for a company to understand their own investors; and relations aim at are including four kinds of investment communities as details: institutional investors (also called fund managers), private investors, analysts, and media
Kinds of typical institutional investors insist of: banks, funds (pension, retirement, mutual or hedge), financial companies, insurance companies Often, institutional investors are organizations which own the vast majority of a company‟s equity and has few restrictions in buying and selling shares; they are normally the most important investment community owing to the heavy weight of money that they can organize and the degree to which they can invest, therefore they shall be also entitled to perform major in decision making in a company and involve in corporate governance
Key significance of institutional investors is that their investment is long- term; therefore they look carefully at a company‟s long-term performance, strategies and prospects
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets They can also include operating companies which decide to invest their profits to some degree in these types of assets
Types of typical investors include internal large shareholders, insurance companies, retirement or pension funds, hedge funds, investment advisors, and mutual funds Their role in the economy is to act as highly specialized investors on behalf of others For instance, an ordinary person will have a pension from his employer The employer gives that person's pension contributions to a fund The fund will buy shares in a company, or some other financial product Funds are useful because they will hold a broad portfolio of investments in many companies This spreads risk, so if one company fails, it will be only a small part of the whole fund's investment
Institutional investors will have a lot of influence in the management of corporations because they will be entitled to exercise the voting rights in a company They can actively engage in corporate governance Furthermore, because institutional investors have the freedom to buy and sell shares, they can play a large part in which companies stay solvent, and which go under
Influencing the conduct of listed companies, and providing them with capital are all part of the job of investment management
Normally, the most of investment shall come from institutional investors with long-term view and complicated requirements Instead, private investors shall be engaged in shorter-term investment
Private investors - wealthy individuals looking for a profitable return in a viable business venture, also known as business angels or angel investors or informal investors - will also offer networking opportunities and business connections or sometimes take on a management role in their invested company
“Private investors - wealthy individuals looking for a profitable return in a viable business venture, also known as business angels or angel investors - will also offer networking opportunities and business connections or sometimes take on a management role in their invested company” Nowadays, an increasing numbers of private investors gather into angel networks (or angel groups, or sub-set of private investors) to share information, research, and analysis; and also pool their money to their mutual portfolio
The investor relations team
In order to generate a proper investor relations program, it is vital to form an investor relations team and assign responsibilities In practice, an investor relations team shall include both internal members of a company and external forces, they are: company management, financial PR firm, and investor relations consultancies
Company management is the most important internal force influencing on an investor relations program of a company Its decisions and actions shall affect the success as well as the failure of an investor relations strategy
Furthermore, all kinds of shareholders also pay a lot of attention on the operation of a company management Investors, especially institutional investors are eager for meeting and keeping an open communication with company management to understand what they are really invested in
Normally, it is Chief Executive Officer (CEO) and Chief Financial Officer (CFO) who shall be responsible for the majority of investor relations activities of a company Their decisions shall get advice and information from the company‟s consultants, and most of cases the Investor Relations Officer (IRO)
Andrew Buchanan, Fund Manager - Octopus Investments has concluded on the role of company management: “Essentially, as investors we are backing the management team and their ability to deliver their strategy and provide returns for their investors It is equally vital that the Non-Executives are high calibre, because shareholders need them to challenge and guide the Executives Investors will want to have open lines of communication with both the Executive and Non-Executive Directors and companies should embrace this as part of their investor relations strategy, for example by a Non-Executive offering to talk directly to shareholders without the Executives present.”
1.2.2 Financial Public/Press relations (PR) firm
A financial PR firm, usually called as a financial communication adviser, shall be responsible for bringing the picture of company and its prospects to the shareholder community A financial PR firm shall work together with other kinds of advisers of the company (investment bank, auditor, legal consultant…) in communicating the company‟s messages to all kinds of its investors and stakeholders The duties of a financial PR firm are as following:
- Business and financial media strategy and relations
- Drafting of regulatory news releases and financial communication presentations
- Gathering analyst forecasts and establishing consensus forecasts
- The in-house corporate PR function”
Source: Investor relations, a practical guide, London Stock Exchange (2010)
Investor relation consultant focuses on specific services of investor relations such as market studies, share register analysis, support of in-house
IR teams… An IT consultant can be a corporate broker, registrar or financial
PR firm Services provided by an investor relations consultant are: share register analysis and efficient targeting, roadshows, qualitative studies, in- house coaching and support, and shareholder communication materials
Share register analysis and efficient targeting: the trading activities are more and more complicated, therefore the share register shall indicate the real shareholders, and stocking trading and lending accounts Share register analysis shall help the company in understanding who really owns its shares, who really decides the investment and who really has the voting rights Under this analysis, and together with other relevant analyses, the IR consultant shall then make an efficient targeting on institutional investors through company‟s meetings
Roadshows: after having the share register analysis and efficient targeting, and due to contact relationship management capabilities of the company, the IR consultant shall assist the company in organization of roadshows (a series of meeting with shareholders)
Qualitative studies: qualitative studies and surveys shall be undertaken to ascertain perception, attitude, acclaim and cognition of a company‟s stock
IR consultant also supports the company in interviewing a cross section of overweight, underweight and absent shareholders to figure out and understand their feelings, and then offer trading and other strategic outputs
In-house coaching and support: whereas most large companies recruit reputed investor relations professionals for their in-house investor relations sector, some small and medium companies with limited budget cannot afford their own investor relations department In these cases, investor relations responsibilities shall be put in company finance or administration department IR consultancy can provide the company with:
- Certain recommendations to a specific corporate action
- Coaching and support IR personnel with no or little experience
Shareholder communication materials preparation/provision: IR consultant can also support by their shareholder communication materials preparation, such as: annual report, announcement, website content… IR consultancy shall advice company management on the content, timing and placing channel of such materials under local and national strict legal and regulatory framework Further, IR consultant also helps on market reaction forecast to company announcements and efficient position of the company.
The procedure of developing an investor relations strategy and program
Realizing the significance of investor relations, it is vital to build and investor relations strategy and program This procedure consists of: figuring out the company‟s case (company‟s investment proposition, forming investor relations team, investor identification and attraction, understanding market expectations and forming compelling messages), and deciding which tools to use to communicate with investment community (press release, website, annual report, social media, meeting, roadshow, conferences and so on)
1.3.1 Investment proposition and setting goals for IR
The elements of the process to formulating investment proposition include: critical analysis on strengths and weaknesses of the company, proposition factors (complication, size and market sector… to look for further investment in long-term/short-term), dividends and capital growth (the company‟s future, paying dividend plan, appearance of long term plan to investor return, short-term/medium-term and long-term benefits of shareholders‟ ownership, rates of growth in revenue and dividend earnings, and potential exit for investors), and the characteristic of easy understanding and communicated to targeted and segmented shareholder community
Not simply a theory, IR is also an art that helps company in obtain more effective communication and credibility with its investment community, and obtain their goals when building and improving an IR strategy and program Below are possible goals that should be common to the IR strategy and program:
- Rise the trading volume and liquidity of the company
- Maintain or change the shareholders base (shareholders structure)
- Realize the security prices that reflects a combination of intrinsic, fair value and upside potential (market efficiency)
- Obtain institutional or private investor commitment, or both
- Cover financial more on media
- Increase the numbers of research/analysis following the company, sell-side analysts coverage
Depending on its capacity, resources and different terms of development, the company shall set proper goals of IR to be achieved
As mentioned in part 2.2 of this chapter, the investor relations team comprises of three elements: company management, financial PR firm, and investor relations consultancies According to the scope and size of the company, as well as the level of market development, specific elements of investor relations team shall be focused and prior more than the others
1.3.3 Identifying, attracting and retaining investors
Identifying investors can be conducted by legal means or technical means Legal means shall identify shareholders through notification of threshold crossing, a central securities depositary, and analysis of voting results Technical means shall identify shareholders through free shareholder techniques, fee-based tools, and financial intermediaries
After finishing the investors identification, the company then conduct the duties of attracting and retaining them Steps to start attracting and retaining investors are: intelligent targeting (including meeting with hedge funds and limitation of institutional targeting), and the “seed, harvest and lock” approach to investor relations
1.3.4 Knowing market expectations and forming compelling messages
After understanding and segmenting its shareholders, the company then figures out market expectations The company is suggested to emphasize on the form and content of market expectations
The next step is forming compelling messages Seven aspects of compelling messages are financial and strategic messages, outlook, investor value creation, mergers and acquisitions, corporate governance and internal control, corporate social responsibility and sustainable development, and investor relations for employee shareholders of the company
Among seven aspects above, financial and strategic messages and outlook are considered the most important Financial and strategic messages can be about: the business environment, organization, human resources, commercial, technological and financial performance, business model, strategy and risk factors The outlook can include some factors such as: forecasts, objectives and guidance, selecting guidance indicators, choice of time horizon, updated outlook, and profit warnings and preannouncements In specific case, messages can be Vision and Mission statement of the company
Table 1.1: IR messages by theme
Source: Anne Guimard, Investor relations – Principles and best practices of financial communications, Palgrave Macmillan publishing house (2008)
While developing a financial calendar, the company should pay attention on: personnel that prepare the financial calendar, the content and publication of financial calendar, and the “silent” periods Normally, the publication date of annual reports in advance should be considered as the beginning of the company‟s financial calendar
As long as having an overall picture of investor relations, the company as to select and implement investor relations tools Depending on the scope and size of the company, as well as the level of market development, the company shall choose some of below investor relations tools to apply to its own investor relations program The investor relations tools can be: all kinds of meeting, company announcements, annual reports and other tools (press release, shareholder letter, financial advertising, rosdshows and reserve roadshows, conference and conference calls, factbooks, fact sheets, disclosure policy, visuals, slideshows and presentations, and website, blogs and social media) These communication tools should be consistent designed for long- term outlook, and also comply with legal regulations, allow for productivity gains, need low maintenance, and meet the expectations and target investment community‟s requirements
There are a lot of proper occasions which shall provide opportunities for the company management to meet with its shareholders, investor relations team, analysts, and media… Some kinds of meetings are: annual general meeting, public meeting, and one-to-one meeting
Annual general meeting: complying with legal framework, annual general meeting plays a key role in shareholder democracy Annual general meeting shall help the company communicate fully with its investment community Together with annual general meeting, the company is suggested to also prepare any new information included in the CEO‟s speech and a strategic point of view
Public meeting: also called an information meeting, is arranged in the company‟s home market, for example, in an IPO, an earnings release, a financial transaction, or for large numbers of investors In addition, the company can invite the media, press, and analysts to this kind of meeting The main advantages of public meeting are: the attendees can see company management in person, and the media (TV and radio) are allowed to deliver images and sounds
One-to-one meeting (also called cornerstone meeting) is usually arranged by third-party This includes:
- One-to-one meeting with institutional investors: this kind of meeting is often for potential and new shareholders, and arranged by corporate broker and located at institutional investor‟s office, in order to give the company‟s introduction and understand shareholders‟ demand
- One-to-one meeting with private client broker: as the private client broker is able to affect on the stability of the company‟s share price, the company‟s financial PR firm can arrange individual meetings with them
- One-to-one meeting with sell-side/buy-side analysts (sector specific analysts or generalists): this shall develop analyst coverage in addition to that of the company‟s house broker
- One-to-one meeting with press: background briefing, which provides journalists with knowledge of the company and overview of competitive market
INVESTOR RELATIONS IN BAC VIET GROUP
An Overview of BacViet Steel
Bac viet Steel Co., Ltd was established on March 6th, 2000 On June 20th, 2008, Bac Viet Steel Co.,Ltd became BacViet Steel JSC Its stock (BVG) was listed on Hanoi Stock Exchange (HNX) on August 9th, 2010
Bac viet Steel has subsidiaries as follow:
Table 2.1: Bac viet Steel subsidiaries
Bacviet Structure Steel Building Company Limited (BSSB)
Manufacturing industrial steel structures, pre-engineered steel buildings
Bacviet Technology J.S.C (BVIT) Producing and trading of black and galvanized welded steel pipes, mold and Injection Plastics
Bac Viet Metal Joint Stock Company (BVM)
Manufacture of metal components, mechanical fabrication, treatment and coating metal, Logistics services
Bac Viet Industry Joint Stock Company (BVI)
Manufacturing steel and equipments, real estates service
Table 2.2: Bacviet Steel has associating companies
Bacviet Trading Joint Stock Company (BVT)
Producing and trading office furniture, household furniture and school furniture
Hannel Urban Development and Construction Joint Stock Company (BVXD)
Bacviet Furniture Company Limited (BVF) Distribution of steel pipes and furniture in Trung Bo and Tay Nguyen provinces
Hung Viet Investment and Technology Joint Stock Company (BVH)
Consultancy on investment, consultancy on development and management of projects on energy recycling, education, training, agriculture and commerce
Figure 2.1: Bac Viet Steeel Structure
Bac Viet Steel Scope of business:
- Producing and trading steel plates, sheets, sections;
- Fabricating pre-engineered steel buildings, lifting & shipbuilding equipments;
- Logistics and Office & school furniture;
Figure 2.2: Bac Viet Steel Diversification Road Map
On 20th June 2008, the initial capital is 56.972 billion VND
On 31st October 2009, its capital increased to 68 billion VND It separated in 2 sections On 25th September 2009, private placement 500,000 shares for a strategic investor Then, it sold 602,809 shares for current shareholders The selling price was 11,200 VND on 10,000 VND par value
On 10th January 2010, the capital increased to 72 billions VND by private placement The selling price was 17,400 VND on 10,000 VND par value
On 24th February 2010, BVG continued to private placement to increase its capital to 84.060 billions VND Five new shareholders bought at 20,000 VND/share
On 14th May 2010, BVG paid out dividend by stock for current shareholders to increase its capital to 97.509 billions VND
Until now, all the increasing capital is carried out before Bac Viet steel was listed in the stock market.2.1.3 Shareholder structure of BVG
Table 2.3: shareholders structure of Bac Viet Steel
No Shareholder Number of share hold on
Table 2.4: Number of share hold by BOD, BOM and Supervisor board
No Name Position Number of share hold on 31/12/2011
2 Vu Huu Tri BOD member 2,173,000 22.29%
3 Nguyen Huu Bao Vice Director 126,000 1.29%
4 Dang Duc Dung BOD member 116,000 1.19%
5 Le Quoc Hung BOD member 44,404 0.46%
7 Le Van Cuong Vice Director 10,000 0.1%
8 Ta Thu Hang Chief accountant
9 Tran Thi Thu Le Chief of
10 Le Van Thuyen Supervisor board member
11 Vu Thi Thu ha Supervisor board member
Table2.5: Number of share hold by big shareholders (more than 5%)
No Shareholder Number of share hold on
IR activities in BacViet Steel
2.2.1 Current status of BVG stock
As the historical data, we can find that BVG stock is on the long downtrend After listing on HNX, BVG stock goes down shapely Just some month later, BVG stock market price was less than face value and remain until now The 1st day price of BVG stock is 21000 (9/8/2010), compare to recent price (around 3500), BVG lost 83% market value There are some price recover period but in general, BVG price did not pass over face value
When we see the HNX-Index historical data at the same period of time, there is a similar downtrend between HNX Index and BVG price By absolute number, HNX Index decreased less than BVG price (only 47%, from 141.9 point date 9/8/2010 to 61.09 point date 19/3/2013)
There are 4 HNX listed companies that their business is metal and steel industry: Bac Viet Steel JSC (BVG), Dana-Y Steel JSC (DNY), Producing and trading metal JSC (KKC), Vietnam-Germany Steel Pipe JSC (VGS) We can use Price-to-Book Value ratio (P/BV) to calculate how the investors valuate the companies Higher P/BV, it is higher the investors valuate the company It means that the investors are willing to pay higher price for the same asset of the companies
The price to calculate here is the price on 30 June each year and the Book value is the last year book value (source HNX report)
Table 2.6: P/BV ratio of companies listed in HNX in metal industry
Compared to DNY, KKC, VGS (3 companies in metal industry), BVG always below than average in P/BV ratio Even in 2010, when BVG 2009 profit was still high, P/BV ratio is only less than haft of the average The investors asked a deep discount for BVG stock
BVG stock was not gain the objective of listing in stock market
Table 2.7: Average daily volume and value of BVG
Daily transaction volume and value of BVG continuously reduces The bottom reached at Quarter 3/2012 Average buy and sell a day just only 7057 share equals 22,679,000 VND Even it recovered, but it is still very low quantity
The liquidity of BVG is very low The shareholders almost may not sell when they need
It is an index of the unbalance shareholder structure
To raise capital in stock market for developing business is one of the goals of any listed company However, BVG can not do it after listed in HXN The price of BVG went down shapely below the face value and the general stock market prevented BVG raise capital
Bac viet Steel does not have a Investor relation department The chairman directly manages it Chief accountant and personnel and administration department manager team to take care all activities related to IR: disclosing information, fulfilling investors‟ rights This way can save the expense for company but IR team lacks a person who can be a secretary to connect and report to IR member
Official spokesperson of BVG is the chief accountant but CEO/chairman is involved in almost the IR job It means that CEO is serious about IR
The personnel and administration department manager take care in detail all IR activities
Areas of IR activity in Bac Viet Steel include:
- Meet fund management companies, analysts, investors, etc
- Prepare financial data, financial documents for Bac Viet Steel
- Manage IR information in company website and answer investors
2.2.3 IR activity in Bac Viet Steel
In Bac Viet Steel, the official spokesperson is Mrs Ta Thu Hang, the Chief Accountant The personnel and administration department manager supports her in non-financial information
Bac Viet Steel always complies with all the regulation of disclosing information in Circular 09/2010 of the Ministry of Finance There are various types of information need to be published as following:
- Periodical information disclosure: the information is composed of annual audited consolidated financial reports half yearly and for the whole year, interim financial reports and annual reports The financial reports are composed of 4 main components: balance sheet, cash flow statement, income statement and financial notes
These financial reports are stored from 2008, 2 years before the time of listing, until now They are arranged by year and by category in the IR section of the corporate website and on the website of HNX
Link for financial report: http://bacvietgroup.com/bao-cao-tai-chinh
- Unusual information disclosure: when there are some events that dramatically affect the company, they have to be published on the corporate website and in the website of HNX Bac Viet Steel always discloses this type of information promptly
- Disclose information at request: BacVietGroup successfully fulfils all the requirements of disclosing information from SSC and HNX
- Disclose information of inside trading: all the transactions relating to the BOD, BOM, big investors, the spokesperson and their relatives are disclosed fully and timely
- Disclose information relating to fulfilling the rights of shareholders: paying dividends, buying options, etc
- Publish the corporate governance report: The corporate governance report is published every quarter
Investors‟ rights are composed of:
- The right to participate AGM, extraordinary general meetings;
- The right to nominate or self nominating to the BOM and supervisory board;
- The right to receive dividends;
- The right to buy shares issued;
The personnel and manager of administration department take care of this job
Chairman/CEO of BVG takes place most of the meetings with potential institutional investors All of them contact through the connections with chairman himself
2.2.3.4 Monitor the movement of the stock market and compose stock market reports
The personnel and administration manager monitors the price of BVG stock and inform BOM when any abnormal happens However, this job is not written on the job description of the manager
Sometimes, BVG have to explain reason for volatility of the price as HNX requirement (price ceiling increase or floor decrease continuously more than 5 business days)
BVG is quite active to use website for disclose information to investors The corporate website is designed for an investor relation part
Investors can find and download information of financial report, corporate governance report, company profile, and annual general meeting data
Member of IR team, especially CEO, frequently update data in this website
There is a forum for investors in the website but a few topic and members are active
Bac Viet is limited in use other IR tools such press release, financial advertising, roadshow or conference.
Evaluation of IR activities in BVG
Chairman of BVG understands the role of IR in the company So, he directly manages and operates IR activities with IR team He often checks the new information and uploads to website himself
Besides complying with the regulation of disclosing information to the public, Bac Viet Steel is willing to disclosure voluntary
2.3.1.2 A relatively strong Investor Relations Team
Even the member of IR team is only 3 but they are all key members of BVG
The leader of team is chairman/ CEO
The spokesperson is chief account She also is considered as CFO of BVG She directly prepares financial document and communicate with the public without misunderstanding
The last is manager of personnel and administration, who take care events and logistic
2.3.1.3 IR section in the corporate website
BVG has an updating IR section in corporate website They update information of website at the same time they submit to HNX and SSC The IR page is designed fairly systematically, providing enough information BVG can use forum function of this website as a communication channel with investors when carry out IR program in the future
2.3.2.1 Lack of IR targets/goals
When listing in HNX, the stock market is not in the favorable period of time The BVG price and volume went down shapely BVG did not keep the goals of listing in stock market The company just fulfilled the disclosure as requirement of regulatory It also did not set any target and let the market lead the stock
Analyzing IR activities of BVG, finding that the company missed out some features:
- identify the current shareholder and targeted shareholder structure
- market research and feedback from investors
- Develop the financial calendar and craft compelling messages
- Not prepare for crisis communication in Investor Relation BVG does not have a target, so the IR activities are not effective
2.3.2.3 Personnel in Investor Relation Team
Even BVG has a strong IR team but they lack of a staff who can concentrate everyday for IR This person may be a staff of marketing, PR department but IR task should have in the job description
BVG did not use more IR tools and did not carry out activities such roadshows, conferences, press release, advertising The investors can not find any analysis report of any analyst about BVG BVG is invisible in hundreds of stock in the market
The reason comes from lack of a program Without an IR plan, BOD can not measure the result of IR activities To save the money, it is easy to understand that they cut this expense for IR activities.
Chapter review
This Chapter has provided a thorough analysis of IR activities in Bac Viet Steel Bac Viet Steel was listed in HNX in 2010
Bac Viet Steel‟s current IR activities include: information disclosure, shareholders‟ rights fulfillment, promotion of Bac Viet Steel, IR section on the corporate website
However, Bac Viet Steel‟s IR activities are still at the first stage of development It doesn‟t use any models to operate (it just responds to the threats as they appear) Without a target and understand market, Bac Viet Steel IR activities can be carried out effectively
Table 2.8: BVG Investor Relations Strengths and Weaknesses
1 Acknowledgement of chairman Lack of IR targets/goals
2 A relatively strong IR team Lack of IR program
3 IR section in the corporate website
Personnel in Investor Relation Team
RECOMMENDATIONS TO INVESTOR RELATIONS
Forming investor relations team
As it is the most significant force affecting on an investor relations strategy and program, BVG is suggested to pay much attention on choosing proper person as the head of all investor relations decisions and activities In this case, it should be Mr Tran Anh Vuong, CEO of BVG
BVG should recruit a staff to IR team IR is a new job in Vietnam and most of Vietnam enterprises are just in the first stage of implementing IR activities IR staffs need to be well rounded people with deep understanding of finance, communication, law, and other soft skills or emotional intelligence It is often said that while one IR staff can substitute PR staff but a PR staff are not competent to be an IR staff This staff should be major in finance; have knowledge and experience of communication, law and some other areas
Out-sourcing IR consultancies or financial PR firms shall be proper cases by cases such as: events organization, market studies and surveys, share register analysis, and support of in-house IR team of BVG According to the necessity, requirements and resources of BVG in certain cases and certain periods, BVG is suggested to consider having an out-sourcing IR consultant or financial PR firm in their IR team.
Identifying, attracting and retaining investors
3.2.1 Identifying the current shareholder base
The current shareholder base is mentioned in Table 2.3 in the Chapter 2
The inside shareholders is the largest shareholder with a more than 51.82% of the stake, only one institutional investor is the large shareholder with 9.17% of the stake, foreign investors is only 0.09%
BVG now can not know the structure of the private shareholders The
IR team should conduct a research by using shareholder list BVG need to know
Furthermore, BVG are not the only one interested in knowing who owns their shares Institutional investors are also very keen to be informed, as it gives them valuable insight into potential evolution of the shares; for instance, the presence of many hedge funds as owners can result in higher volatility risks, while a large portion of the share held by employees can indicate long-term stability
- Through questionnaires: After earnings presentations, meetings or roadshows, BVG can simply hand out short questionnaires to their audience for information of their thinking and impressions on the company itself or the meetings, and the probability of their becoming current shareholders of BVG
- Through talks and discussions: BVG‟s IR team can talk to BVG‟s current investment community about their own exact shares they are holding These kinds of talks and discussions also help BVG in figuring out the probable shifting strategy, the persuasion process, and so on
Non-Free shareholder identification methods
- Buying databases: In order to identifying shareholder base, BVG can also buy information and database from fund managers or buy-side analysts The information and database are about portfolios by sizes, investment policy, geography, portfolios of competitors, portfolios of market sectors, industry…
- Traditional marketing methods (mailing, e-mailing…): by this kind of methods, BVG shall simply send questionnaires and questions via mails, emails… with existing contact database
3.2.3 Identifying the appropriate shareholder base
After finishing the identification of current shareholder base, BVG can identify its own proper shareholder base In order to ensure suitable liquidity and price (chartered capital raising as well), BVG is suggested to maintain a well structured shareholder base to include:
This balance can be changed from time to time when market conditions and the strategy of BVG change However, the most appropriate shareholder base for BVG now should contain domestic individual shareholders and foreign institutional shareholders.
Knowing market expectations and forming compelling messages
Market expectations are about both form and content of financial communication BVG is suggested to create the proper accessibility of information (on website, financial advertising, shareholder letter…) and clear and detailed contacts on IR (internal IR team or financial PR firm or IR consultancies) About the content of market expectations, regardless of which information is released, it must be clarified Financial communications can be about: current financial situation, comparisons of current financial situation with the past, with competitors and with industry The financial communication under market expectations shall be objective, informative and consistent with BVG‟s overall strategies
In order to better understand investors who can be approached to invest (moreover, to understand the right way to target investors), Bac Viet steel is recommended to carry out a study of investors The Study should be in both qualitative research and quantitative research with objectives: investors including both domestic and foreign investors as well as individual and institutional investors
After understanding market expectations, BVG then forms compelling messages First and foremost, any messages should be clearly written The language used (both Vietnamese and English) should be simple and easy to understand
The compelling messages can be Vision and Mission statement of BVG itself These messages are recommended by the author as following:
Vision: To become the most reputation construction steel manufacturing and trading company in Vietnam
Maintaining the leading enterprise's competitiveness position
Training and educating human resource meeting with global standards and qualifications
Ensuring competitiveness ability within nation and the region
Mission statement: Bac Viet Steel company„s guide line is always for the interest of customers, shareholders, employees, steel industry and the country
For the customers: Bac Viet Steel Company commit to maximise the customer‟s interest by consulting and supplying perfect quality products, professional services at the competitive price
For the employees: Bac Viet Steel always take care to their material and spiritual lives We also guarantee to provide stable income for the employees and highly appreciate their loyalty and contribution
For the Shareholder: Bac Viet Steel attaches special importance to increase share value and dividend.
Developing financial calendar
Financial calendars are planned to comply with legal deadlines for financial information disclosure, of which the main categories revolve around the following:
- Quarterly, interim, and full-year revenue and earnings announcements;
Timelines for each event can begin only after the calendar has been established While designating owners of the event, it reduces the level of execution risk and helps identify potential productivity gains and savings For instance, early advance planning and scheduling may help obtain attractive prices on meeting rooms and venues or documentation mailing costs for the annual meeting Furthermore, analysts will appreciate receiving a “save-the- day” before invitations arrive from the competition
An appropriate financial calendar for BVG is suggested by the author as following:
Table 3.1: Sample financial calendar for 2013 fiscal year of BVG Quarter 1 Quarter 2 Quarter 3 Quarter 4 Notes
Summary meetings of previous year/ five years
Financial summary of Quarter 3 and first three quarters
Roadshows One-to-one meetings with institutional investors
Brief financial summary of year 2013
Using investor relations tools
To reach the suitable shareholder base, there are two objectives for IR activities:
Attract more (foreign) institutional investors
3.5.1 Maintain a balance of shareholders a Corporate website :
Corporate website is the most important channel for companies; therefore, to attract and maintain these four categories, BVG is recommended to improve an IR section that:
Table 3.2: Best practice of a website content and structure of BVG
Source: Investor relations, a practical guide, London Stock exchange (2010)
In financial information section: There should be a financial analysis of financial reports of the BVG This could include financial highlights of BVGs: ROA, ROE, EPS, etc to help investors have an overview of financial situations of BVG This material should be in format that is easy to read and download for users
Booked mail: in this section, investors can subscribe to receive: latest announcements, financial reports, earning announcements, etc This is the best way to stay in contact with the investors who are really interested in the company
Language: In the Vietnamese version, the information is rather adequate and updated but, it is very poor in the English version So, in order to meet the needs of foreign investors, BVG should update the English version of the IR section b Events
There are many IR events: AGM, Investor Day, Analyst Day, Roadshow, non deal roadshow, reverse roadshow, investor meetings, etc The AGM is for shareholders and the Investor Day is for investors The remained are for mainly institutional investors Therefore, events are considered a good way to target at institutional investors
To better communicate with financial communities, BVG should continue to organize these events and at the same time improve the content, and its event organisation
There are many other events BVG might consider such as: roadshows, earnings announcements, workshops, etc These events would be a novel way to approach different types of investors These events should be organized suitably during the year to ensure that financial communities are regularly updated c Co-operation with brokers
Brokers are an important source of information for individual investors when they make investment decisions To better approach individual investors, BVG should maintain a good relation with brokers both freelance and from securities companies
There are many ways to build up relations with brokers One is providing regular update to brokers to help them know exactly what is happening with companies This can be done by newsletter, one-to-one meetings or conferences for brokers d Co-operation with buy-side
Investors, especially institutional investor often base their investment decisions on the company report of some reputable securities company In Vietnam, Securities companies, etc Therefore, BVG should closely cooperate with these companies to provide them enough information to produce a company report e Use other IR tools
Combining other IR tools to build awareness of BVG as well as communicating information BVG to financial communities transparently
These IR tools include: factbooks, letters from the CEO, factsheets, blogs, Facebook and financial advertising, etc
Bac Viet Group should design the financial advertising with the following key points:
- Not too much information and visually appealing
- Consist of the main messages, financial data, and contact information
- Detailed contact of IR department, corporate website address
According to the capacity and resources of the company, as well as the context of the market and industry, Bac Viet Group should consider the usage of factbooks and fact sheets (especially before IPO, Mergers and acquisitions, and capital increases…)
The content of presentations and slideshows: strategy plan, progress, Q&A session, the key message The presentations slideshows should be updated as soon as possible
3.5.2 Attract more (foreign) institutional investors
As mentioned in the key findings of the research, institutional investors have a systematic way to select a stock to invest Foreign institutional investors have many things in common with institutional investors in general in terms of sources of information, and the process of decision making, so the
IR activities suggested to attract institutional investors in the previous section can be applied here: a Improve the website
Regardless of the content, or the interface of the website, the website should have the equivalent English version to provide information to foreign investors In order to do this, the IR division should design a procedure to collaborate with the IR division, Corporate communications department and Financial Institution department b Events
In organizing events, it should be noted that the webcast is very important because foreign investors can participate even when they are in their own country (which saves them time and the cost of travel) Moreover, they can see the webcast and read the material after the event when they want to research the BVG
In addition to domestic events, an active way to approach foreign institutional investors is to go overseas to meet them BVG can host some events overseas such as: one-to-one meeting with potential fund managers and analysts c Regularly update the information
BVG should build a database of investors and regularly update them on the latest information of BVG When foreign investors come to visit BVG, the
IR division of BVG should create conditions for them to have a look at BVG‟s operation and have a chance to discuss directly with BVG: the BOD, BOM of BVG (according to the market research, one of the most important sources of information for foreign institutional investors is from one-to-one meetings with the company) d Promote BVG & BVG via financial media
With foreign institutional investors, their source of information is a little bit different from domestic investors They often research information using some English websites: Vietnam Economy, Economy Review, etc or from professional financial channels: Bloomberg Therefore, BVG should cooperate with selected English financial channels to promote BVG and BVG to foreign institutional investors e Cooperation with sell-side
Improving investor loyalty and retention
For the case study of BVG, the company is recommended to take advantages of cost saving and efficient way to extract value from their investors BVG should promote online investor communication, and educating their investors to be devoted followers
Furthermore, BVG should also apply other financial strategies to support for their investor relations support, such as: bonus shares, timely returning of money and bonus, increased dividends, strong financial performance themselves and easy access to BVG‟s products, services on certain and specific terms, forming and maintaining investment community clubs, investors‟ interests program, and so on.
Managing negative media communication
First and foremost, BVG should insist in building their own reputation and credibility Once any information is released, it must be truly informative, objective and constructive; and it must be accessed easily and rapidly by shareholders and stakeholders before the media, the press, the analysts or the markets
Secondly, BVG is recommended to formulate alert systems, policies to deal with crisis communication, crisis management special tactics team…
Thirdly, BVG is suggested to be involved in press relations or investor relations forces or industry associations, such as: VCCI‟s enterprises associations, Vietnamese steel associations, Sao Vang Dat Viet (Vietnamese yellow star), Fast 500…
Chapter review
This chapter includes recommendations/ suggestions to improve Investor Relations activities of Bac Viet Steel
Implement Investor Relation program in BVG includes:
Forming IR team Indentify, attracting and retaining shareholders Forming compelling message by understanding the stock market Developing financial calendar
Using IR tools Improving investor loyalty and retention Manage negative media comunication
IR includes both mandates regulated by laws and proactive activities of companies to promote the image of company and its stock to investor communities
In order to build up an effective IR strategy and program, models of IR activities to apply to Bac Viet Steel which listed in HNX with stock code BVG, which will contribute significantly to the overall strategy of Bac Viet Steel in the near future Therefore, it is very necessary to do a research of IR activities theories to apply into IR activities in Bac Viet Steel in order to make it more professional and more efficient
Therefore, the thesis “Developing and improving investor relations –
The case study of Bac Viet Group” goes into details to resolve this issue
With the order approach, the chapter 1 covers the theories of IR activities In this chapter, the definition, objective, audience of IR is clearly defined After that, the models of organizing IR division, models of implementing IR programs are reviewed to find out the suitable one to apply in to listed company Besides, all the widely used IR tools are also presented in this chapter
Chapter 2 analyses details of the current IR activities of Bac Viet Steel
Combined with the theories in the chapter 1, the current situation of BVG IR activities are analyzed carefully to find out the weaknesses and the strengths
Some of the strengths of Bac Viet Steel are that Acknowledgement of chairman, A relatively strong IR team; IR section in the corporate website
However, Bac Viet Steel‟s IR activities haven‟t been out of the context of IR activities in Vietnam – which is in the first stage of development and all of the IR activities lack strategy
The thesis also points out recommendations for Bac Viet Steel to enhance IR activities In the chapter 3, the author presents how to apply the IR models in the actual situation of Bac Viet Steel and give some overall suggestions to improve IR activities In this chapter, the author also presents in details how to apply a suitable model of implementing IR program in Bac Viet Steel
1 Anne Guimard (2008), “Investor relations: Principles and International
Best Practices of Financial Communications”, Palgrave Macmillan,
2 Bruce W Marcus (2005), “Investor Relations in a Dynamic World”, John Wiley & Son, Inc., Hoboken, New Jersey
3 Michillen Chang, Patrick Murphy, Marvin Wee (2009), “An investigation into impact of investor relations on the profitability of director share trading”, The university of Western Australia
4 Millicent Chang Li Yin Hooi, Marvin Wee, “The impact of investor relations disclosure on analysts’ forecast”, The university of Western
5 Qualvin advisory Pte Ltd (2006), “The senior executive guide to successful investor relations in Asia”
6 Reuven Lehavy, Richard G Sloan (2005), “Investor recognition and stock returns”, University of Michigan
7 Sayjda Talib (2007), “Investor relations and expectation management”, Lancaster University management school
8 Thomas M.Ryan, Chad A.Jacobd (2005), “Using investor relations to maximize equity valuation”, John Wiley & Son, Inc., Hoboken, New
9 The Nasdaq stock market, “The strategy and practice of investor relations”, The Nasdaq stock market
10 Circular 09/2010 of Ministry of finance: instructing information disclosure with public companies
11 Annual report 2012, Bac Viet Steel JSC
13 http://www.ciri.com.vn/Home/default.aspx
BVG Consolidated Balance sheet (short format)
BVG Consolidated Income statement (short format)
BVG Consolidated Cash Flow Statement (direct)
NET CASH FLOW FROM OPERATING ACTIVITIES
Cash from other operating activities
Cash paid for other operating activities
NET CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposals of fixed assets
Cash paid for purchasing debt instruments
Cash received from selling debt 0 10,451,000,000 0 0 instruments
Loan granted to joint venture/subsidiar y
Cash from the investments in other entities
NET CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of shares
Cash paid to financial leasing debts
FOREIGN EXCHANGE GAIN/(LOSS) ON CASH AND CASH
EPS (TTM) STRICT 98.7213 209.1288 2,684.66 2,191.28 NET INCOME (TTM) 962,626,373
NET WORKING CAPITAL/TOTAL ASSETS 0.0021 0.0575 0.0864 0.1917
- Mr Tran Anh Vuong – Chairman/CEO of Bac Viet Steel
- Mrs Ta Thu Hang – Chief Accountant and Official Spokesperson of Bac Viet Steel
- Mrs Vu Thi Thu Ha – Personnel and Administration Manager of Bac Viet Steel
- Mr Dang Duc Dung – Independent member of Board of Director
- Mr Nguyen Tuan Duong – Analyst of Beta securities company