6 Things An Investor Relations Pro Should Know

Investor Relations Professionals are knowledgeable people. But beyond being knowledgeable, they are expected to have a good grasp of the following areas to make an impact on the company they represent and the community they serve:

1.       Understand financial markets

Mr. Munir Gwazo, SEC DG

Financial markets are the hub around which quoted companies revolve; they indicate how well company stocks are doing.

Investor relations pros should have a good knowledge of how markets work. That there is a primary market called Initial Public Offering (IPO) and a secondary Market.

He should know how the market measures whether it is performing well or not by way of the Market Index, called All Share Index (ASI) and how much capital it is warehousing called the total capitalisation. (See the market section of daily newspapers).

He should also get to know the following about his company:

-          Share Price

-          Opening price, Closing Price

-          Price Earnings Ratio

-          Earnings Per Share (EPS)

-          Stock price trends

-           should know about the stock performance of his competition and the sector

2.       Understand financial statements

An investor relations professional should have basic understanding of financial statements such as the Profit and Loss Account (P&L) and the Balance Sheet.

He should know about:

-          Gross earnings/turnover

-          Operating profit

-          EBITDA

-          Pre-tax profit

-          Net profit

-          Performance ratios

3.       Understand economics

The IR man should have some basic understanding of macroeconomics indicators so he can contextualise the performance of his company and his sector/industry.

-          He should learn about inflation (CPI)

-          Interest rates

-          Producers Price Index

-          GDP etc

-           

4.       Strong investment community contact

The investment community especially investment bankers are the guys who are going to under right and buy up your company shares so its good to have a good relationship with them.

When your company is going to make an offer, at some point, you are going to have to bring them together in a forum (investor forum) to sell your stock and or find a way to give them regular updates about your company.

5.       Know the financial media

The financial media is very crucial for carrying your message beyond a handful of investors and stakeholders. In Nigeria, most daily newspapers have business sections where financial news is carried.

You need to know the nuances of the financial media as there are some that are strictly business newspapers like BusinessDay and those with a 50-50 approach like Independent. Yet there are those where financial news is only a micro part like the Sun Newspaper.

There are a couple of online media that have very strong financial content like Proshare and Nairametrics

6.       Regulatory Filings

There are regulatory filings companies make to the regulators that an investor relations practitioner should be familiar with such as quarterly and annual statements of results filed with the Securities and Exchange Commission (SEC). Companies offering shares for sale would need to file a prospectus

CBN says no cause for alarm over JP Morgan delisting bonds

The Nigerian economy will not suffer material damage over the removal of the country from the JP Morgan's Government Bond Index for Emerging Markets (GBI-EMI) says the Central Bank of Nigeria (CBN).

This line is also towed by some analysts who say that Nigeria’s exit from the global index can only be temporary.

The CBN also said that the strong bond market will lead primarily to the strength and diversity of the domestic investor base.

CBN Governor, Godwin Emefiele

According to the CBN, despite the fact that oil prices have fallen by nearly 60 percent in one year, it has called for expectedly reduction of  the amount of liquidity in the market, ensuring that all genuine and effective demand were met, especially those from foreign investors.

In this vein, there was a mandate that all forex transactions were posted online in the Reuters Trading Platform so that all stakeholders can easily verify all transactions in the market. In addition, the Official FX Window at the CBN was closed to ensure a level-playing field in the pricing of foreign exchange.

 Analysts say the JP Morgan action may have scant effect in the short term as good number foreign investors have previously liquidated their Nigerian bond holdings. So, the level of capital outflows from this current episode will be relatively infinitesimal.

 Head, Research & Investment Advisory at Sterling Capital, Mr. Sewa Wusu, says:  “If you look at the total JP Morgan bond portfolio of about $208.29 billion, Nigeria`s FGN bond only constituted about 1.5% which is about $3.12 billion. This implies that this amount will be sold off from the index potentially”. 

Mr Femi Ademola, a research Associate at BGL Plc also said that the exclusion of Nigeria from the JP Morgan's Government Bond Index for Emerging Markets (GBI-EMI) was not an unusual phenomenon.

 He said every Index is created based on inclusion criteria or rules which may be flexible or rigid. Although not sacrosanct, he said the flouting of any of the index inclusion criteria is a ground for exclusion.

Hence, Ademola noted that if the Nigerian currency failed the index criteria on liquidity, it is normal for the bonds to be removed as index constituents. Because the index creation is rule based it does not matter what caused the illiquidity or the actions of the monetary authority in managing the currency volatility, the failure of Naira to meet the required liquidity benchmark could lead to exclusion from the index.

JP Morgan Index fallout, investors may sell-off $2 billion worth Nigeria bonds

As Nigeria smarts from JP Morgan’s forking off her bonds from its emerging market index, analysts say as much as $1.5 to $2 billion dollars may be shed by investors on Nigerian bonds.
As direct result from the JP Morgan action, the yield on Nigeria's 10-year bond has jumped from 16.2 per cent yesterday morning to 16.7 per cent today, according to data obtained from Bloomberg.
Nigeria accounts for 1.5 per cent of the largest GBI-EM Global Diversified index, which is tracked by $183.8bn.
Samir Gadio, head of Africa Strategy at Standard Chartered, said:
There's a risk we see a further spike in yields as foreign investors exit and domestic investors will turn more bearish
The removal of Nigerian government bonds from the GBI-EM indices will be seen as a setback for Nigeria (and the wider frontier Sub-Saharan African region) after a series of successful reforms to develop capital markets from the mid-2000s.
The country's external credentials may also be affected. Being a GBI-EM country highlighted Nigeria's achievements in building sophisticated and vibrant financial markets over the past decade… this exclusion could also make it more difficult to attract much-needed portfolio inflows
The Nigerian government introduced a series of restrictions on foreign exchange transactions earlier this year as the naira collapsed amid a rout in oil prices. Oil accounts for the vast majority of government revenue and foreign FX inflows.
The naira fell 24 per cent against the dollar between November 2014 and February 2015, before the restrictions capped it at about 200 per dollar.
The exclusion from the indexes could result in further FX restrictions, as it removes the incentive for the government to liberalise foreign exchange.
Yvonne Mhango at Renaissance Capital says:
Now that JP Morgan has removed Nigeria from the EM bond index, we think there is even less reason/urgency for the CBN to allow the naira to depreciate, and to relax the FX restrictions.
The risk is we may see further FX restrictions being imposed in the near term, given that Nigeria will lose about $2bn of capital at a time when the CBN is avidly trying to conserve reserves.
An auction of Nigerian bonds scheduled for next week could be hit by the exclusion. Mr Gadio at Standard Chartered said the Debt Management Office may cap yields at the auction. He said:

when markets are extremely volatile, they may sell less than initially advertised which allows to issue the bonds at lower yields than required by investors. For example, this happened in July.

Source:

http://www.ft.com/fastft/389131/nigerian-bonds-slide-after-jpmorgan-index-exit

JP Morgan to remove Nigeria from government bond index

JP Morgan will remove Nigeria from its Government Bond Index (GBI-EM) by the end of October, the bank said on Tuesday, after warning the government of Africa's biggest economy that currency controls were making transactions too complicated.

Godwin Emefiele, CBN Governor

The removal will force funds to sell Nigerian bonds, triggering potentially significant capital outflows and raising borrowing costs for the government.
Struggling with a plunge in vital oil revenue, Nigeria had imposed currency restrictions to defend the naira after the burning of dollar reserves failed to halt a slide.
The JP Morgan index tracks around $210 billion in assets under management.
Some bonds will be removed from the index by the end of September and the rest by the end of October, JP Morgan said.
The bank had warned Nigeria that to stay in the index, it would have to restore liquidity to its currency market in a way that allowed foreign investors tracking the index to conduct transactions with minimal hurdles.
Nigeria became the second African country after South Africa to be listed in JP Morgan's emerging government bond index, in October 2012, after the central bank removed a requirement that foreign investors hold government bonds for a minimum of one year before exiting.

 Source:
http://www.reuters.com/article/2015/09/0
8/nigeria-bonds-index-idUSL5N11E3Y320150908

Business-Like Investing Can Help You Pick Better Long-Term Stocks

The high priest of value investing himself, Benjamin Graham, taught us that, “investing is most successful when it is most business like.”  That makes sense because investing in stocks is, quite literally, the act of buying an ownership stake in businesses.  Whether you own 100% of the shares of a local jewelry store in your hometown, or 1,000/4,405,893,150th of The Coca-Cola Company based on its total shares outstanding in the last 10-K filing, the end result is much the same: There are only three ways you can make money from your stock.

This simple distinction makes it easier to spot flaws in an investment portfolio because it changes your behavior.  You suddenly demand a margin of safety in your purchases because you expect to be compensated for the different types of risk to which you are exposing yourself and your family.  You require evidence based on facts rather than hope for high growth assumption rather than getting swept away in the euphoria of crowds.  During stock market crashes, you can remain rational and buy ownership positions in quality companies at bargain prices despite everyone else rushing for the exit in panic.  You seek to understand things such as how the firm generations its underlying cash flow, what types of assets makeup the balance sheet, and whether management is following capital allocation and dividend policies that are friendly to you and other owners.
If you don't currently treat your stocks like this, I urge you consider a paradigm shift.  On my personal blog, I've spent the past few years driving home the concept by running case studies of stocks as viewed through the lens of business-like investing; looking at the long-term results generated by holding ownership stakes in businesses as diverse as Chevron  General Mills, McDonald's, Clorox, Hershey's, Nestle, Colgate-Palmolive, Procter & Gamble, Coca-Cola, Tiffany & Company, and the now-bankrupt Eastman Kodak.

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