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Westbrook on the line


Westbrook on the line

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									                                                                                                                                                                                                    Newsletter of Westbrook Communications Issue number 8

                                                                                                                                                                                                      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
                                                                                                                                                                                                                                                   Leading webcast companies in the US
                                                                                                                                                                                                    greater importance as they provide
                                                                                                                                                                                                                                                   agree that the real target for webcasts are
                                                                                                                                                                                                    information not previously available to
                                                                                                                                                                                                                                                   analysts, fund mangers and brokers who
                                                                                                                                                                                                                                                   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
                                                                                                                                                                                                    – 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
         Email                  Internet/                                        Fax              Traditional                                Online   CD-Rom                                        – clear directives on company strategy         Tredegar Corporation, a medical
                                 Web                                                               hard copy                                business/                                                  and outlook                                 technology company.
 *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
                                                                                                                                                                                                    and performs.                                  enables readers to tally up business unit
                                                                                                                                                                                                                                                   valuations to reach their own estimate of
                                                                                                                                                                                                                                                   a fair share price, which they can
                                                                                                                                                                                                                                                   compare with the market value.
 0                                                                                                                                                                                                                                                 A reader response survey showed 90 per
                                     Company history

                                                       Articles from business
                                                                                                    Product information

                                                                                                                          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
                                                                                                                             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
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

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