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Westbrook on the line
Newsletter of Westbrook Communications Issue number 8 Westbrook on the line Preferred delivery methods for corporate information Online Information Investment professionals (%)* 90 As more investment information Webcasting 80 becomes available over the internet, By early 2001, 3000 US companies were 70 both retail and professional investors are using webcasts for company 60 now rating the internet and email highly announcements, up from 500 companies 50 as critical information sources. a year ago. 40 Corporate websites are also assuming 30 Leading webcast companies in the US greater importance as they provide 20 agree that the real target for webcasts are information not previously available to 10 analysts, fund mangers and brokers who investors. 0 are following numerous companies and do Email Internet/ Fax Traditional Online CD-Rom The charts on this page illustrate how not have time to go and visit each one. Web hard copy business/ database the internet rates as an information While this technology makes it possible Retail investors (%)* source with retail and professional for information to be broadcast to a 70 investors in the US and what they look potentially large audience, the real 60 for in corporate websites. challenge is to make sure the audience 50 Winning Websites knows when to listen to get the information it wants. 40 Recent awards for investor relations 30 websites have identified the following Directing Valuation characteristics for commendation: 20 One US company that has taken an 10 – a well-designed home page with alternative approach to having investors clear links to all facets of the business understand the value of its business is 0 Email Internet/ Fax Traditional Online CD-Rom – clear directives on company strategy Tredegar Corporation, a medical Web hard copy business/ and outlook technology company. database *Multiple responses – placement of the company within its Source: 2000 Investor Relations Magazine US Awards The company’s complex structure had industry sector led the board to believe its business – links to a broad range of related was undervalued and not understood. information sites – up to date information relating to To solve this problem, the directors share price, recent announcements included in the 1999 annual report a Use of corporate web sites and current issues facing the company section providing information about – photos, spreadsheets and charts to valuation. Investment professionals accessing information on the web (%)* detail a company’s position in its The section gives details about each 90 market individual business including 80 – virtual tours of company operations. competitive positions, core strengths, 70 Overall, award judges were looking for growth strategies and primary risks. 60 websites that give investors a better understanding of how a company operates A worksheet at the end of the report 50 and performs. enables readers to tally up business unit 40 valuations to reach their own estimate of 30 a fair share price, which they can 20 compare with the market value. 10 0 A reader response survey showed 90 per News releases Annual/quarterly reports Company history Articles from business publications Corporate descriptions Product information Webcast conferece calls IR contact name Executive speeches Stock quotes and charts cent of respondents felt the report enhanced their understanding of the business and 80 per cent said the report was better than others. *Multiple responses Tredegar’s 1999 and 2000 annual reports Source: 2000 Investor Relations Magazine US Awards can be seen at www.tredegar.com Biotech – What an Analyst Looks For With biotech stocks increasing in popularity, Westbrook Communications’ David Reid caught up with JP Morgan’s Wayne Gentle to discuss what analysts look for in biotech. Wayne Gentle has been an analyst with Checkpoints include: like Novogen Limited is a good JP Morgan for nine years and for the past – management. How experienced is example in that it is lower risk three, Wayne’s world has been biotech management in conducting clinical because it has products already in and healthcare stocks. trials and its track record in the market place but has the commercialising other products? advantage of blue sky with early Q Why would you recommend – scientific advisory panels. It is stage development of new products investment in a biotechnology stock? important to know if leading industry in the development pipeline. Another A There is definitely a market for this figures from the area of therapy being positive angle is the fact that a type of investment but the important targeted are involved. number of products derive from point is it has a place in an investment – intellectual property. How innovative the same technology platform and portfolio and should not comprise an is the idea and how well is it patent if one works there is a cascading entire portfolio. protected? impact on the value of other drugs Q How do you make money out of a – potential markets. They must be in the portfolio. biotechnology stock? global and large to attract investor Q How can you recommend a stock interest even at early stage. A You make money by getting in early when you know it may never show a – competitive advantage. How many enough that you participate in the upside profit like a conventional business? other players are there? How of a successful product but you have to advanced are they? A The basic approach I take is to look at balance that against the risk of failure – sound business plan. Management the market the company is targeting, look which in this sector is very high. must be strong scientifically but at the size of that market and make some Q What criteria do you apply when have a good head for business so broad assumptions about what a drug choosing biotechnology stocks? that a drug can be commercialised might earn and make a judgement about if it reaches that point. how long it may take to get to market. A My approach is to look at industry – project mix. Companies with a I then risk weight those cash flows, benchmarks in terms of failure rates, how number of projects in varying stages depending on what stage the process many drugs are in portfolio, the stage of development are an attractive has reached, usually by a very high rate they are at and the likely "news flow" investment proposition. A company of discounting. which will have an influence on prices. News flow is another factor to consider when making investment recommendations. David Reid (left) and Wayne Gentle If the company does have an impressive market but is in a period of no news, it is unlikely that company will generate support for its share price. Overlaying all this of course is the mood of the market. Q On the issue of news flow, the market demands it, yet the media is suspicious of too much news. What is the balance? A It is a very fine line and the market will read a lot into news releases from small cap companies because that is essentially the only thing that will drive value. Q Can you profile for me the sort of retail investor suited to a biotechnology play? A Generally, biotechnology suits those who have had some investment experience, definitely not for the faint hearted in terms of share price gyrations and the high risk nature of the sector. Secondly, it is not a place for retirement funds or late stage superannuation money. It is good for long term investors Magazine Review who want an element of blue sky in their portfolios but understand risk and can Shareholder Value Magazine mitigate it through understanding the checkpoints I have outlined. Kennedy Information Group, New York, NY, Tel (212) 973 3720, http://www.kennedyinfo.com I regard a 10 per cent exposure as reasonable, even more than sufficient, a 20 per cent exposure as quite aggressive. The health care index is about three per cent of the total market. If you take out the top half dozen companies which make up 90 per cent of the index, you are looking at a very small component of the market overall. So even a 10 per cent weighting is quite heavy when considered in the context of the whole market. Q Are there still worthwhile returns for retail investors if they invest in biotechnology through pooled or managed funds? A I think this is an excellent strategy for retail investors. The problem for most retail investors looking at biotechnology The US business publishing group, School, looks at how companies create stocks is a lack of access to information Kennedy Information, has started a new value through the effectiveness of their that a broker or analyst would have. magazine focusing on investor relations, business leaders and employees. Listed trusts are also worthwhile. titled Shareholder Value. Kotter says the best link of superior Q What is the state of the biotechnology The magazine, which has recruited financial performance and corporate sector in Australia at the moment? prolific investor relations guru, Bill behaviour is when leaders develop a Mahoney, as executive editor, has a work culture which focuses equally on A I think we have gone through a stage broad range of investor relations topics three audiences - employees, customers where it has received a lot of publicity. lined up for its bi-monthly issues. and investors - and that over-emphasis It was confused a little bit with the on any of the three, such as shareholder internet run. Notwithstanding, Australia A feature of each issue is the returns, does not work in the long term. has great biotechnology intellectual Shareholder Value 100 listing, which property and I think the mapping of the ranks companies according to an Lack of sincerity in corporate values will human genome was just a signal that indicator of the contribution lead to failure and at the same time, biotechnology was becoming a more management makes to a company’s total values can’t be too soft as to be important part of investment opportunities performance. unconnected with any notion of financial and that will continue to be the case. It performance, Kotter says. Management contribution is measured will become more important for retail and over five years by an increase in market The magazine also gives considerable institutional investors but it still has its capitilisation plus distributions to coverage to new SEC regulations on fair place in the overall mix. In future, there shareholders and compared with returns disclosure which require simultaneous will be less get rich quick and more from a passive investment in an index release of information to all investors. emphasis on quality. fund of the same risk level. Shareholder Value points out that one Q Can biotechnology also be a long Initial listings of the 100 have placed effect of the regulation can be to codify term "play"? technology companies like Cisco at the the obvious - that ubiquitous and A Definitely. Getting in early does top, a ranking likely to change abundant information can make it maximise returns but the odds of failure significantly in coming issues. worthless. vary at each stage of the development In the current issue of the magazine, a The challenge exists for analysts and process in biotechnology. case study of medical devices company, investors to use information to make Wayne Gentle is Healthcare Anyalyst Research, Medtronic, puts its annual 37 per cent superior judgements and the opportunity JP Morgan gains in shareholder value down to two is there for companies to provide insights A full transcript of this interview can be seen on main factors. with the information and define new www.westbrookfin.com.au criteria for how they are assessed by Medtronic says its corporate culture, Wall Street. with a focus on saving lives through medical devices, is its main value driver, Forthcoming issues of Shareholder Value combined with listening to customers, might be worth the investment. who are mainly doctors, about the medical devices they need to do their jobs better. Growth in shareholder value has become a by-product of these two principles, says Medtronic. An interview with John Kotter, Professor of Leadership at the Harvard Business Cartoon Corner Client Clips A major Japanese metals group is to buy 40 per cent of Alkane Exploration’s zirconia project at Dubbo. Brickworks has acquired Bowral Bricks and lifted dividend for the half year to December 2000 as well as paying its seventh successive special dividend. CCH has made four strategic investments in the past six months to expand its internet-based information business. An alliance “The Age” / Michael Leunig between Clover Corporation and the CSIRO is putting nutritious fish oil on the menu. Commonwealth Property Fund now owns 100 per Facts and Figures cent of Indooroopilly Shopping Centre. Commonwealth Property Hotel – Supporting a well established link – 52 per cent of adult Australians are sleep during meetings – and nearly Fund has acquired Rockman’s between share price and good now shareowners, either indirectly 90 per cent admit to daydreaming Regency Hotel in Melbourne and the reputation, a recent US survey or directly, with 40 per cent of adults while attending meetings Sydney Renaissance Hotel. Gradipore identified eight key components of being direct shareowners, and half – Meetings consume 20 per cent of the is in discussions with the world’s corporate reputation: of these have not traded in the last working day in Australia and cost major blood fractionation companies 1. Innovativeness 12 months $21 billion a year in time and wages regarding possible adoption of the 2. Quality of Management – Male investors trade 45 per cent – Executives in the US and UK attend Gradiflow biological separation 3. Employee Talent more often than their female more than three times the number of technology. Huntley Investment 4. Financial Soundness counterparts but their annual risk- meetings of Australian executives Company has raised interim dividend 5. Use of Corporate Governance adjusted net returns are 1.4 per cent – Australian listed companies are 25 and outperformed the All Ords 6. Long-term Investment Value less than those earned by women per cent owned by retail investors, Accumulation Index for the fifth 7. Social Responsibility – 50 per cent of Australian companies up from 15 per cent four years ago consecutive year. Macquarie 8. Quality of Products/Services deviated from basic accounting – 59 per cent of people assume a CountryWide has boosted income – Even though brand power is on the procedures in the preparation of their company is "probably guilty" if it is and assets over the six months to rise, 78 per cent of analysts and 72 1999 financial reports – in 50 per cent being sued, and 69 per cent believe December 2000 and formed a per cent of companies in London say of these cases auditors or directors that a "no comment" approach to the partnership for investment in the US. there is not enough information on asked for explanations media confirms guilt Macquarie Leisure’s Dreamworld key brands – One in three executives catch up on is hosting the reality television show, ‘Big Brother’. Milnes has won product supply contracts from Telstra. Neville Ward Direct has produced a DIY investor pack to enhance no www.westbrookfin.com.au front-end fee investment choices. Novogen has received FDA approval Westbrook Communications’ web site has been established as an Westbrookcommunications for human clinical testing in the US information centre for ASX and NSX listed companies and our clients. of its anti-cancer drug phenoxodiol. Westbrook communications specialises The site provides stock exchange announcements and corporate “Fudge” global sales have lifted in financial public relations and investor profiles, accessible free of charge by the media, investors and the Sabre’s interim profit and dividend. relations. investment community. SP Telecommunications has raised $20m and listed on ASX. The Stock International affiliates include Exchange of Newcastle has London, New York and Hong Kong initiated a capital raising to fund Contact Ian Westbrook, Cherry Dinh, expanded marketing. W H Soul David Reid, John Burke or Rebecca Hall Pattinson half year sales and profit if you would like to discuss our activities were steady and dividend up for the further. period to January 2001. Westbrook Communications 23 Hunter Street Sydney NSW 2000 Telephone 61 2 9231 0922 Facsimile 61 2 9231 0131 firstname.lastname@example.org
"Westbrook on the line"