IR can affect valuation both positively and negatively, finds survey of fund managers and analysts
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 percent say good or bad investor relations can affect valuation.
Digging deeper, the survey finds that 60 percent of respondents think ‘excellent’ IR can add more than 5 percent to a stock. Around a third (36 percent) say the best IR can add between 5 percent and 10 percent. Roughly a quarter (24 percent) feel top-notch IR could contribute more than 10 percent.
On the other hand, 79 percent of respondents say the maximum discount for bad IR could be 5 percent or more. For 30 percent, poor IR practices could see the stock discounted by more than 15 percent.
‘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.
