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INVESTOR RELATIONS:
THE CASE STUDY OF TWO AUTOMOBILE COMPANIES
IR: THE DEFINITION
• “ … a strategic management responsibility using the disciplines of finance,
communication and marketing to manage the content and flow of company information to financial and other
constituencies to maximize relative valuation.”
(National Investor Relations Institute/NIRI)
IR: THE DEFINITION
“ … is the strategic management responsibility that integrates the disciplines of finance, communication and marketing
to achieve an effective two-way flow of information between a public company and
the investment community, in order to enable fair and efficient capital markets.”
(Canadian Investor Relations Institute/CIRI)
IR: THE DEFINITION
“…the Management of the relationship between a company with publicly traded
securities and the holders or potential holders of such securities…”
(The UK Investor Relations Society)
IR: GOAL & OBJECTIVES
Goal:• Positioning the company to compete effectively for
investors’ capital
Objectives:• Explain the company’s vision, strategy and potential
to investors and “conduit constituencies”• Ensure that expectations of the company’s stock
price are appropriate for its earnings prospects, the industry outlook and the economy
• Reduce stock price volatility by maintaining a stable stock price and shareholder base
WHAT IS IR?
• As the connecting point for investment community to have a sneak peak of the company’s performance
• Providing ‘Corporate Governance’ to the company (PLC)
• Abiding to the rules and regulations set by security commission (apart from answering the investment communities with regard to the company’s financial health)
MAIN FUNCTION OF IR
• Provides information– About the company– About the business– About company’s performance– About future plan of the business / company
• Improve reputation and credibility– By building up shareholders base– By conducting investment related business
activities
IR: WHOSE RESPONSIBILITY?
• Chief Executive Officer – involved in developing the objectives and strategies of IR programs which supports the company’s long-term business goals
• Chief Financial Officer / Finance Director – collate financial data and strategic messages for transmission to the investment community
• Company Secretary – ensure share register is kept up-to-date and ensure that the IR process complies with all regulations
• IR Manager – drive and coordinate IR programs and design corporate messages which accurately reflect the overall business objectives of the company
IR: TARGET GROUPSIndividual Institutional Intermediaries Others
1. YOU2. ME3. US
1. INSTITUTIONAL SHAREHOLDERS
2. FUNDS INVESTORS
3. SECURITIES COMPANIES
1. Rating Agencies - Standard & Poor- Moody’s
2. Finance news media-print – Business Times, Wall
Street Journal-electronic – Money Matters-internet – Valueline.com, surf88
3. Stock/Securities/Investment Analysts & Brokers
1. Employees2. Customers3. Suppliers4. Bank/Financial
Institutions5. Official Regulators
- Bursa Malaysia- Securities
Commission6. Government
- Bank Negara Malaysia
- Lembaga Hasil Dalam Negeri
IR: TACTICS• Annual meetings and annual reports – current
financial status & future plans/projections• Newsletters, magazines, personal letters• Website (stock prices, annual reports, executive
speeches, news releases)• Webcast (live audio-visual feeds – meetings with
financial/investment analysts)• Multimedia road-shows• News releases, media kits • Phone contacts• One-to-one meeting (+CEO/CFO)
IR: THE IMPORTANCE (how IR adds value)
Why?• Investors demand more communication, more
transparency and more access to companies/organizations
How?• Markets the company’s shares to investors• Assumes a marketing role to a company’s stock• Provides regular informational updates and explanations
of company’s performance to the marketplace• Communicate strategies in response to both internal
(mergers, acquisitions, etc.) and external events (unanticipated crisis)
• Identify and understand major/influential shareholders
IR: THE CHANGING ENVIRONMENT• Technological advances (websites, Internet)
– provides/enables great transparency by providing real-time information about companies to wide audiences
• Changing business environment – globalization, liberalization, rules & regulations (the emergence importance of corporate governance)
Corporate governance is about promoting corporate fairness, transparency and accountability. The corporate governance structure specifies the distribution of rights and responsibilities of the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. We score the companies based on specific issues such as board composition, management remuneration, accounting treatment and transparency. ..
"Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society“.(Sir Adrian Cadbury in 'Global Corporate Governance Forum', World Bank, 2000)
Due diligence. The process of checking the accuracy of information contained in a company public statement, such as a prospectus, before recommending that company to others. Is also the act of one company investigating another company before buying its shares.
IR: THE CASE STUDY
PROTON Holdings Berhad(Company No.: 623177-A)
THE HISTORY• PERUSAHAAN OTOMOBIL NASIONAL BERHAD or
PROTON was incorporated on May 7, 1983 to manufacture, assemble and sell motor vehicles and related products, including accessories, spare parts and other components.
• PROTON produced Malaysia's first car, the Proton SAGA, commercially launched on July 9, 1985 by Malaysian Prime Minister, Dato' Seri Dr. Mahathir Mohamad, who had originally conceived the idea of a Malaysian car.
PROTON: THE CASE STUDY
History• PROTON main plant in Shah Alam, with an area of
923,900 sq metres, was originally designed for a capacity of 80,000 units per year. In 1997, capacity increased to 230,000 units per year with the construction of the Medium Volume Factory, which is next to the Main Plant. Now the Shah Alam factory is capable of producing 240,000 vehicles per year.
• Tanjung Malim is the ultra-modern manufacturing and assembly plant that can produce 5 times the capacity of Shah Alam plant.
PROTON: THE CASE STUDY
THE HISTORY• PROTON was publicly listed on the Kuala Lumpur Stock
Exchange (KLSE) in 1992 at the IPO of RM5. Its shareholders (as of 25 July 2002) were:
§ Khazanah Nasional Berhad - 31.63 %
§ Petroliam Nasional Berhad - 11.57 %
§ Mitsubishi Corporation - 7.94 %
§ Mitsubishi Motors Corporation - 7.94%
§ Employees Provident Fund Board - 7.35%
§ Other Local and Foreign Investors - 33.57%
PROTON: THE CASE STUDY
THE HISTORY• Besides being shareholders, Mitsubishi
Corporation and Mitsubishi Motors Corporation are also PROTON technical assistance partner and component supplier.
** The JV with Mitsubishi ended April 2004
PROTON: THE CASE STUDY
THE HISTORY• PROTON Holdings Berhad was
established on 28th July 2003 to manage the group’s investment activities under a holding company
• Under the new structure, the group is divided into 7 different divisions
PROTON: THE CASE STUDY
PROTON: THE CASE STUDYTHE GROUP OPERATIONS STRUCTURE
PROTON Holdings Berhad
Engineering Services
Manufacturing
Marketing
Properties
Financial Services
Investor & Associates
Others
CORPORATE COMMUNICATION & INVESTOR RELATIONS
PROTON: THE CASE STUDY
• Are 2 different entities
• Inter-related
• Corporate Communication supplement IR
• Both are answerable to CEO but IR is under the supervision of CFO
PROTON: THE CASE STUDYTHE CORPORATE
IDENTITY The tiger head conveys clearly the Malaysian heritage being associated to the 2 tigers displayed on our national coat of arms
The diamond shape, derived from our very first top mark, and the colour scheme are a symbol of continuity with the past success**CC input in IR
PROTON: THE CASE STUDY
THE CORPORATE VISION
“We want to become a successful Malaysian automotive manufacturers globally by
being customer oriented and producing competitively priced and innovative quality
products”
**CC input in IR
Website**CC input in IR
Annual Report**CC input in IR
IR TACTICS / APPROACHED– IR WEBSITE– QUARTERLY INVESTOR BRIEFINGS with the
CEO– ANNUAL REPORT– QUARTERLY FINANCIAL REPORTS– MEDIA BRIEFINGS / PRESS RELEASES– EVENTS (i.e. Outings, community projects etc)– NEWSLETTERS/MAGAZINES
PROTON: THE CASE STUDY
PROTON: THE CASE STUDYThe Share Price Q205 – Q206
ANALYSIS OF SHAREHOLDING Share Capital: RM 1,000,000,000/- Authorized Share Capital
and Fully Paid Up Capital : RM 549,213,002/- Class of Shares : Ordinary Shares of RM 1/- each Voting Rights: One (1) Voting Right for one (1)
Ordinary Share
PROTON: THE CASE STUDY
**TOP 30 SHAREHOLDERS (refer attachment)
PROTON: THE CASE STUDY
CHALLENGES external
internal
-GM
-DRB
-MOFAZ
-NAZA
-CHERRY
-PSA
THE WAY FORWARD:-
PROTON: THE CASE STUDY
OR ANOTHER RE-STRUCTURING???
IR: THE CASE STUDY
PERODUA
PERODUA: THE CASE STUDY
• Perodua, acronym of Perusahaan Otomobil Kedua Berhad (in English, Second Automobile Manufacturer Limited Corporation) is Malaysia's second automobile manufacturer after Proton. It was established in 1993.
• Perodua mainly produces compact cars and therefore does not actually compete with Proton for the same market niche. In the United Kingdom their cars are sold by Proton dealers who wish to attract those customers seeking a smaller and cheaper alternative to the Proton range.
• The Perodua Kancil is Daihatsu Mira while Kelisa is Daihatsu Cuores assembled in Malaysia. Because Perodua does not actually produce any in house design and engineering for the main components (i.e engine, transmission), some people questions their status as car maker. To some, Perodua are just mere assemblers. Daihatsu owns a majority stake in Perodua. Daihatsu itself is now a subsidiary of Toyota Corp.
PERODUA: THE CASE STUDY
The joint venture partners/shareholders of Perodua and their respective shareholding are UMW Corporation Sdn Bhd (38%), Daihatsu Motor Co. Ltd. (20%), MBM Resources Berhad (20%), PNB Equity Resources Corporation Sdn Bhd (10%), Mitsui & Co. Ltd (7%) and Daihatsu (Malaysia) Sdn Bhd (5%).
Perodua Kancil was introduced to the Malaysian market in August 1994.
PERODUA: THE CASE STUDY
PERODUA: THE CASE STUDY
PERODUA: THE CASE STUDY
The Shareholders
UMW+MBM+PNB+DMSB (local stakeholders)
(foreign stakeholders)
PERODUA: THE CASE STUDY
ORGANIZATIONAL STRUCTURE
PERODUA: THE CASE STUDY
CORPORATE COMMUNICATION
COMP. SEC / LEGAL
TOP MANAGEMENT
BOARD MEETING
GROUP COMPANY SECRETARY
The only means of IR for Perodua
Corporate Information / Board of Directors
Chairman
YBhg Tan Sri Datuk Asmat Kamaludin
Members
Mr Katsuyuki Kamio - Daihatsu
YBhg Tan Sri Datuk (Dr) Kazumasa Suzuki - Mitsui
Mr Looi Kok Loon - MBM
YBhg Dato' Abdul Rahim Abdul Halim - MBM
YBhg Dato' Dr Abdul Abdul Halim Harun -UMW
YBhg Datuk Yoshihiro Uehara - DMC
Encik Hafiz Syed Abu Bakar – MD, Perodua
Encik Wan Roshdi Wan Musa - PNB
Encik Aqil Ahmad Azizuddin - DMSB
Alternate Directors
Encik Aqil Ahmad Azizuddin -MBM
(Alternate WITH Ybhg Dato' Abdul Rahim Abdul Halim)
PERODUA: THE CASE STUDY
PERODUA: THE CASE STUDYTEN Largest Shareholders As At 30th September 2006 (for UMV; the PLC)
Shareholders No. of Shares %
1. Amanah Raya Nominees (Tempatan) Sdn. Bhd. - Skim Amanah Saham Bumiputera 240,872,148 47.44
2. Employees Provident Fund Board 42,262,249 8.32
3. Permodalan Nasional Berhad 23,234,069 4.58
4. HSBC Nominees (Asing) Sdn. Bhd. - Exempt An For JPMorgan Chase Bank, National Association (U.S.A.) 22,378,796 4.41
5. Amanah Raya Nominees (Tempatan) Sdn. Bhd. - Amanah Saham Wawasan 2020 17,383,200 3.42
6. HSBC Nominees (Asing) Sdn. Bhd. - BBH And Co Boston For GMO Emerging Markets Fund 14,974,400 2.95
7. Malaysia Nominees (Tempatan) Sendirian Berhad - Great Eastern Life Assurance (Malaysia) Berhad (Par 1) 13,600,000 2.68
8. Lembaga Tabung Haji 8,746,933 1.72
9. Amanah Raya Nominees (Tempatan) Sdn. Bhd. - Amanah Saham Didik 8,368,700 1.65
10. HSBC Nominees (Asing) Sdn. Bhd. - Exempt An For J.P. Morgan Bank Luxembourg S.A. 6,492,854 1.28
Should Perodua wish to go for listing?? (the requirement of IR)
PERODUA: THE CASE STUDY
Starting with the Basic
Developing Message
Analyzing Shareholders’ base
Marketing to the buy side
Global reach
THE CASE STUDY
THE COMPARISON
Conclusion• The main purpose of IR is to attain and
retain the highest share price that is consistent with an accurate and informed view of the company’s relative performance and potential in the market
• IR allows a company to communicate its financial health and corporate goals to financial and non-financial stakeholders
INVESTOR RELATIONS:THE CASE STUDY OF TWO AUTOMATIVE COMPANIES (GLC)
Note for presenter:
July 20, 2006
Corporate governance for state enterprisesIn spite of extensive privatization over the last two decades, state-owned enterprises (SOEs) are still a mainstay in many developing economies. China, India, Russia and
South Africa are just a few countries where wholly or partly government-owned SOEs remain productive and influential.
Good corporate governance is crucial for SOEs in emerging markets, because they face even more governance challenges than private companies do. Unlike a widely-
held private company, an SOE usually cannot have its board or management changed via a takeover or proxy contest, and they usually cannot go bankrupt. In addition,
they may have "free" equity and a very low cost of subsidized loans. Thus, the incentives for board members and managers to maximize the value of the company and keep costs in check are reduced. Accountability and performance may also be
hindered by political interference, poorly defined non-commercial objectives, and an absence of transparency. Strong internal controls, good disclosure, independent boards of directors, and other corporate governance tools can help state-owned
enterprises perform well and act in the best interests of citizens and other shareholders.
A new World Bank paper from David Robinett discusses corporate governance of SOEs in eme