The Australian investment community has followed those in the US and Canada by stating that investor relations can have a significant impact on company valuation.
In a survey of fund managers and analysts conducted for the Australasian Investor Relations Association (AIRA), 89 per cent say good or bad investor relations can affect valuation.
Digging deeper, the survey finds that 60 per cent of respondents think ‘excellent’ IR can add more than 5 per cent to a stock. Around a third (36 per cent) say the best IR can add between 5 per cent and 10 per cent. Roughly a quarter (24 per cent) feel top-notch IR could contribute more than 10 per cent.
On the other hand, 79 per cent of respondents say the maximum discount for bad IR could be 5 per cent or more. For 30 per cent, poor IR practices could see the stock discounted by more than 15 per cent.
‘This shows the vast majority of fund managers and analysts who own and write research on companies believe investor relations impacts on value,’ says Ian Matheson, AIRA’s chief executive, in a press release.
‘In my view, meaningful quality investor relations can influence the market’s understanding and P/E of a company,’ comments John Murray, managing director of Perennial Value Management, also in the release.
The survey follows similar studies conducted in the US and Canada, which also found that IR can have a big effect on valuation.
Most recently, TMX Equicom published a survey in June that found Canadian investors and analysts, when shown two similar companies with different IR practices, would put a premium on the company with superior IR.
AIRA’s survey, conducted in April, canvassed the views of 53 fund managers and 28 stockbrokers covering industrial stocks in the S&P/ASX 100.
[Article by Tim Human, Inside Investor Relations]