Data-Driven Investor Relations: We Cannot Be Mere Wordsmiths - Part 1

Content Creation, Data Driven, Brand Awareness, Strategy, Undervalued, Intrinsic Value / 12 January 2022

Why do listed companies hire Investor Relations Consultants?

  1. To assist the company in achieving a share price that reflects the financial fundamentals of the company
  2. To provide the company’ shareholders with timely, useful, and accurate information
  3. To create content that showcases the company’s strengths and differentiates it from competitors
  4. To generate brand awareness and build the company’s brand equity
  5. To advise the company with market positioning, and to provide feedback on investor perception of its image and reputation

Investor Relations Then and Now

When data was not so readily available and investors were not so data-conscious, Investor Relations professionals were regarded as Wordsmiths whose job was mainly to craft narratives and mould perceptions using carefully (or artfully) chosen words.

While it is true that choice of words and crafting of messages is an important investor relations skill, today’s Investor Relations professionals cannot be mere Wordsmiths.

A company’s raison d'être [the reason for its existence] is its business. And business is about financials, and financials are about numbers. As finance and investing become ever more data-driven, the use of data to support the IR narrative becomes indispensable. Whether it’s the company’s financials, or investor’s sentiments and feedback on its brand, quantifiable metrics can enhance IR strategies.

Case Study

Problem: The Company says its stock is undervalued and does not reflect its fundamentals.

What the IR professional can do: Construct an Intrinsic Value model of the Company and its closest Competitors using three different metrics: Discounted Earnings, Discounted Cash Flow and Discounted Dividends. Support your press release with the findings of the study.

Example from SGX listed stocks: (Data as of 11 May)

In this example we compare Q&M Dental Group with its near competitors, a chain of GP clinics and hospitals (Raffles Medical), a Cancer Specialist (TalkMed) and a mega-market cap international medical and hospital chain (IHH). Table 1 below shows that Q&M is the most undervalued by all three models.

DE= Discounted Earnings
DCF= Discounted Cash Flow
DD=Discounted Earnings
+%= % undervalued
-%= % overvalued

MktCap $b) DE % DCF % DD %
Q&M 0.46 +36.73 +51.69 +89.79
Raffles Medical 2.0 -4.40 +4.90 +47.98
TalkMed 2.0 -50.44 -66.57 +83.42
IHH 17.2 -30.00 -17.81 +12.41
Table 1: Comparison of Intrinsic Value of Q&M and its near-competitors.

Conclusion

This is a better way to prove the point that the stock is undervalued. Under/Overvaluation must always be analysed in the context of the industry the company is operating in, as well as in relation to the valuations of its peers. Taken on its own, you could come to completely incorrect assumptions or conclusions about the quality, profitability, viability and growth prospects of the company.