Developing and improving investor relations - the case study of Bac Viet Group = Xây dựng và nâng cao hoạt động quan hệ nhà đầu tư - nghiên cứu trong trường hợp cụ thể của thép Bắc Việt

VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS



NGUYEN THANH CONG

DEVELOPING AND IMPROVING INVESTOR RELATIONS
THE CASE STUDY OF BAC VIET GROUP

Major: Business Administration
Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS


Supervisors: Vu Huy Thong, PhD
Ha Nguyen, MBA

Hanoi - 2013
vi

TABLE OF CONTENTS
ACKNOWLEDGEMENT i
ABSTRACT ii
TÓM TẮT iv
TABLE OF CONTENTS vi
LIST OF TABLES ix
LIST OF FIGURES x
LIST OF ABBREVIATIONS xi
INTRODUCTION 1

1. Necessity of the thesis 1
2. Research aims and objectives 2
3. Research questions 2
4. Scope of study 3
5. Data Sources and Processing 3
6. Research method 3
7. Significance of the study 4
8. Limitations 4
9. Expected Results 4
10. Short introduction 5
CHAPTER 1: LITERATURE REVIEWS OF INVESTOR RELATIONS 6
1.1 The concepts of investor relations 6
1.1.1 The definitions 6
1.1.2 The benefits of investor relations 7
1.1.3 Targeted audience of IR 8
1.2 The investor relations team 15
1.2.1 Company management 16
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1.2.2 Financial Public/Press relations (PR) firm 17
1.2.3 Investor relations consultancies 18
1.3 The procedure of developing an investor relations strategy and program 19
1.3.1 Investment proposition and setting goals for IR 19
1.3.2 Forming investor relations team 21
1.3.3 Identifying, attracting and retaining investors 21
1.3.4 Knowing market expectations and forming compelling messages . 21
1.3.5 Developing financial calendar 23
1.3.6 Using investor relations tools 23
1.3.7 Improving investor loyalty and retention 28
1.3.8 Managing negative communication and crisis 29

CHAPTER 2: INVESTOR RELATIONS IN BAC VIET GROUP 30
2.1 An Overview of BacViet Steel 30
2.1.1 Bac Viet Group Structure 30
2.1.2 Charted capital increasing process 33
2.2 IR activities in BacViet Steel 36
2.2.1 Current status of BVG stock 36
2.2.2 Operation of IR team 39
2.2.3 IR activity in Bac Viet Steel 39
2.3 Evaluation of IR activities in BVG 42
2.3.1 Strengths 42
2.3.2 Weaknesses 43
2.4 Chapter review 44
CHAPTER 3: RECOMMENDATIONS TO INVESTOR RELATIONS
ACTIVITIES OF BAC VIET GROUP 46
3.1. Forming investor relations team 47
3.2 Identifying, attracting and retaining investors 48
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3.2.1 Identifying the current shareholder base 48
3.2.2 Shareholder identification methods 48
3.2.3 Identifying the appropriate shareholder base 49
3.3 Knowing market expectations and forming compelling messages 50
3.4 Developing financial calendar 51
3.5 Using investor relations tools 53
3.6 Improving investor loyalty and retention 65
3.7 Managing negative media communication 66
3.8 Chapter review 66
CONCLUSION 67
REFERENCES 68
REFERENCES 69

APPENDIX 1. 71
APPENDIX 2. 78


ix

LIST OF TABLES

Table 1.1: IR messages by theme 22
Table 2.1: Bac viet Steel subsidiaries 30
Table 2.2: Bacviet Steel has associating companies 31
Table 2.3: shareholders structure of Bac Viet Steel 34
Table 2.4: Number of share hold by BOD, BOM and Supervisor board 34
Table2.5: Number of share hold by big shareholders (more than 5%) 35
Table 2.6: P/BV ratio of companies listed in HNX in metal industry 37
Table 2.7: Average daily volume and value of BVG 37
Table 2.8: BVG Investor Relations Strengths and Weaknesses 45
Table 3.1: Sample financial calendar for 2013 fiscal year of BVG 52
Table 3.2: Best practice of a website content and structure of BVG 54

x

LIST OF FIGURES

Figure 1.1: Media matrix 13
Figure 1.2: The model and process of investor relations 15
Figure 2.1: Bac Viet Steeel Structure 32
Figure 2.2: Bac Viet Steel Diversification Road Map 33

xi

LIST OF ABBREVIATIONS

AGM
Annual general meeting
BOM
Board of management
BOD
Board of directors
CEO
Chief executive officer
CFO
Chief financial officer
BVG
The stock code of Bac Viet Steel in HNX
IRO
Investor relations officer
IR
Investor relations
IFRS
International financial reporting standards
HNX
Hanoi stock exchange
PBT
Profits before tax
PR
Public relations
SSC
State securities committee

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ABSTRACT
DEVELOPING AND IMPROVING INVESTOR RELATIONS
THE CASE STUDY OF BAC VIET STEEL
Nguyen Thanh Cong
MBA Candidate, 2007 – 2009
Hanoi School of business
Vietnam National University, Hanoi
Supervisors: Vu Huy Thong, PhD
Ha Nguyen, MBA
March 2013, 90 pages

In most listed companies, Investor Relation activities are material
information disclosure and investors‟ rights fulfillment. In fact, Investor
Relation can get strategic advantages if the company uses it actively,
effectively and professionally. Bac Viet Steel has been reformed to joint stock
company since 2008 and was listed in 2010 with the stock code of BVG. Bac
Viet Steel is a small company compared to others in steel industry. Therefore,
Bac Viet Steel needs to establish professional and effective Investor Relation
activities to gain more competitive advantage.
In Bac Viet Steel, Investor Relation is considered important. Investor
Relation team is manage directly from Chairman/CEO. However, all Bac Viet
Steel‟s IR activities do not follow a plan or program. It just fulfills the
regulatory requirement or improvised action. The thesis is aimed to improve
Investor Relation in Bac Viet Steel to make a competitive advantage.
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The introduction part of the thesis including: the necessity of the thesis,
the research aims and objectives, the research questions, the research

methodology, the scope of the research and the significance of the research.
Chapter 1 researches the current theories of IR activities. In this section, the
definition, objectives, audiences of IR activities are clearly defined. There is
not a perfect model to organize an IR division for all companies. Based on
models of implementing an IR program, the selected model features are in the
following order: (1) identify the current shareholder and targeted shareholder
(2) attract and retain shareholders (3) understand market expectations and
form compelling messages (4) Develop the financial calendar (5) Select and
implement IR tools (6) Deal with crisis communication in Investor Relations.
Chapter 2 analyzes Bac Viet Steel‟s Investor Relation activities,
including the strengths and weaknesses. Acknowledgement of the leaders
about IR is one of the strength, but weaknesses of IR activities were
identified as (1) Bac Viet Steel hasn‟t applied any IR program model (2) BVG
does not have fulltime IR staff (3) some short backs with IR activities.
Based on above analyses, Chapter 3 presents the solutions and
recommendations for Bac Viet Steel to correct the weaknesses and to enhance
IR activities. This chapter also provides details of how to implement an IR
program in Bac Viet Steel, and improve investor loyalty and retention.



1

INTRODUCTION
1. Necessity of the thesis
When being listed on the stock exchange market, the company must
comply with the laws and regulations of the stock exchange market as well as
overall legal framework. These regulations may vary from the disclosure of
information to production of particular financial statements. As a result of all
of these compulsory tasks and the active promotion activities of companies, a

new business area has been created - Investor Relations (IR). In other words,
IR is a job that has only recently appeared in Vietnam - it is the activity of
listed companies to create a 2-way communication with investor
communities.
Vietnam stock market is in the early stage, in many listed companies, IR
activities are just disclosure of basic information and investors‟ rights fulfillment.
The stock market in the world has a much longer history and IR activities is the
way to achieve purpose of the company when listing in the stock market – capital
competing.
Therefore, it is necessary to research theoretic, models of IR activities
to apply to Bac Viet Steel which listed in Hanoi Stock Exchange (HNX) with
stock code BVG, in order to build up an effective IR strategy and program,
which will contribute significantly to the overall strategy of Bac Viet Steel in
the near future. This is the reason that the author chose this topic:
“BUILDING AND IMPROVING INVESTOR RELATIONS
THE CASE STUDY OF BAC VIET GROUP”
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2. Research aims and objectives
The aim of this thesis is to (1) propose a suitable model for an IR
division, (2) propose a model to implement IR activities, (3) and give some
recommendations to enhance the current IR activities in Bac Viet Steel. The
ultimate aim of this thesis is to make the IR activities in Bac Viet Steel more
professional and efficient, achieving international standards. In order to do
that, there are some objectives that should be reached:
 Thoroughly research current theories of IR activities, including:
models of constructing the IR division, models of implementing IR
programs and IR tools.
 Analyze Bac Viet Steel‟s current IR activities and define its
strengths and weaknesses.

 Give recommendations to Bac Viet Steel for the organization of its
IR division, implementation of its IR program and improving its IR
activities in general.
3. Research questions
To fulfill the objectives of the study, the following research questions
need to be answered:
 How to improve Bac Viet Steel‟s IR activities to support the
company‟s strategy?
 What is a suitable model to organize the IR division in Bac Viet
Steel?
 What is a suitable model to implement an IR program in Bac Viet
Steel?
3

 What should be done to implement IR program in Bac Viet Steel to
make it more efficient and support the general strategy of Bac Viet
Steel in the future?
4. Scope of study
A joint stock company who wants to list on stock market has to meet
many strict requirements as well as fulfill many duties by the regulations. To
maximize its shareholders benefit and competitive advantages, it not only
meets the regulation but also makes higher effort by Investor Relation
activities. This study is conducted in the scope of Investor relations of listed
companies. It is planned to implement deep analysis on the case study of Bac
Viet Steel JSC which listed on Hanoi Stock Exchange.
5. Data Sources and Processing
This thesis uses both secondary and primary data sources. The
secondary data come from related studies on investor relations, studying
books, articles, online documents and so on. The secondary data also come
from reports, news-letters… from Bac Viet Steel. The primary data come

from direct interviews with company management, staffs of Bac Viet Steel.
The interviews are also conducted with shareholders, analysts… in Hanoi
Stock Exchange. The list of interviewees shall be detailed mentioned at the
end of this thesis.
6. Research method
This study is a research which applied qualitative (descriptive) method.
A review of related literature/documentation is carried out to understand the
concepts, the process and procedure of building and improving investor
relations strategy and program of a listed company. The qualitative method is
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also through interviewing relevant persons. Questions will be developed and
structured interviews are conducted.
7. Significance of the study
This study shall contribute to the body of knowledge and understanding
on IR including: the concepts of IR, models of organizing an IR function,
models of implementing IR programs and many IR tools that are widely used
in the world now It also helps Vietnamese enterprises enrich their
knowledge on IR for better application in cooperation with business activities.
It also could be a good reference material for leaders and the Investor
Relations Office (IRO) of Bac Viet Steel.
The thesis also provides the recommendations that are applicable to the
current IR activities of Bac Viet Steel: the models of organizing the IR
division, the way to implement IR programs in Bac Viet Steel and some
suggestions to improve the IR activities in Bac Viet Steel in order to obtain
the aims and objectives of an investor relations strategy and program.
8. Limitations
This study focuses on Investor relation with analysis only on Bac Viet
Steel case study and use data available in 2012. The study is planned to
conduct within the duration from 6 months to 1 year. The time constraints

may have some impact on the findings and the quality of solutions.
9. Expected Results
The study will give a better understanding on the IR definition and its
elements as well as the program of IR activities. Moreover, recommendations
to Bac Viet Steel Investor Relations activities are at the chapter three of the
study.
5

10. Short introduction
The thesis is composed of 3 parts:
Chapter 1: Literature review of IR activities
Chapter 2: The current situation of IR activities in Bac Viet steel
Chapter 3: Solutions to enhance IR activities in Bac Viet steel
6

CHAPTER 1: LITERATURE REVIEWS OF INVESTOR RELATIONS
“Our view of the world is that investor relations strategy,
focused on long-term equity value, should be a force in all
corporate communications decisions.” Tom Ryan and Chad
Jacobs – Using investor relations to maximize equity
evaluation, John Wiley & Sons publishing house.
1.1 The concepts of investor relations
1.1.1 The definitions
Along with the history of the development of stock exchange market, IR
concepts is more and more developing, and more and more paid attentions by
companies and enterprises, especially those who are quoted. These days, IR is
going beyond its theoretical meanings. It is also an art in the modern business
and management. There are different definitions on investor relations and none
of them has a dominant acceptance among analysts and theorists. Two of them,
which are widely used as practical guides on investor relations, are:

“Investor relations is the communication of the relevant and necessary
information by which the investment community can consistently make an
informed judgment about the fair value of a company’s shares and
securities.” - Investor Relations Society, UK (The Hong Kong Institute of
Chartered Secretaries, Guidance Note - A practical guide to good governance)
And:
“Investor relation is a strategic management responsibility that integrates
finance, communication, marketing and securities law compliance to enable the
most effective two-way communication between a company, the financial
community, and other constituencies, which ultimately contributes to a
company’s securities achieving fair valuation.” - National Investor Relations
7

Institute, US (The Hong Kong Institute of Chartered Secretaries, Guidance Note
- A practical guide to good governance)
According to the above definitions, investor relations is the term used
to explain all the activities of an organization or a company communicating
with all kinds of investors. However, for each kind of investors, specific
communication tools are designed and used for the organization or company
to gain better understanding and efficiency about the organization‟s or
company‟s business strategies and activities, management, financial
performance, and also the future of the organization or company. This,
actually, is two-way communication between the organization or company
and its investors. “Investor relations is a dialogue as is as much about
companies explaining their business to the investment community as it is
about companies listening to the views and feedback from that very group.” –
Investor relations, a practical guide, London Stock Exchange (2010).
As the nature of investor relations is about explaining to investors and
listening to their feedback, investor relations is seen as a long-term process, not an
occasional activity.

1.1.2 The benefits of investor relations
According to these above definitions of investor relations, the
objectives of investor relations are not only about company explaining their
business to all kinds of investors but also about company listening to the
investors‟ feedback. The benefits of investor relations are clearly defined in
three aspects as following: access to capital, liquidity and fair valuation.
Access to capital
The first and foremost method to measure the importance of investor
relations of a company is the raised capital. The two-way communication
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between the company and their investment community shall lead to ways of
accessing capital. The more efficient and cost-effective access to capital is,
the more successful the investor relations is.
Liquidity
Besides access to capital, another purpose that listed companies like to
reach through investor relations is attracting liquidity from their investor
relations activities, or, in other words, increasing the frequency of financial
trading in investors‟ shares. Once the investment community understands the
company, and relying on the availability of their shares, through the investor
relations, sellers and buyers can be attracted with pools as well as trade at
greater frequency of their shares.
Fair valuation
Furthermore, one of the chief objectives of investor relations is fair
valuation of the company, which is expressed by share price. Proper
communication with investors shall assist company in informing their own
achievements and breakthroughs. It also assists company in the understanding
of market evaluation process and the status of share price in the market as
well as the status of the company in the market (comparing to other share
prices). Actually, a well-executed, carefully planned investor relations

program can help a company to improve their ability to achieve fair value.
And fair market valuation is what companies should seek.
1.1.3 Targeted audience of IR
Investors of a company come in very various shapes and sizes with
various requirements and needs, investment manners and behaviors. Thus, it
is of much importance for a company to understand their own investors; and
practicing investor relations shall help. The subject – matters that investor
9

relations aim at are including four kinds of investment communities as details:
institutional investors (also called fund managers), private investors, analysts,
and media.
1.1.3.1 Institutional investors
Kinds of typical institutional investors insist of: banks, funds (pension,
retirement, mutual or hedge), financial companies, insurance companies. Often,
institutional investors are organizations which own the vast majority of a
company‟s equity and has few restrictions in buying and selling shares; they are
normally the most important investment community owing to the heavy weight
of money that they can organize and the degree to which they can invest,
therefore they shall be also entitled to perform major in decision making in a
company and involve in corporate governance.
Key significance of institutional investors is that their investment is long-
term; therefore they look carefully at a company‟s long-term performance,
strategies and prospects.
Institutional investors are organizations which pool large sums of
money and invest those sums in securities, real property and other investment
assets. They can also include operating companies which decide to invest
their profits to some degree in these types of assets.
Types of typical investors include internal large shareholders, insurance
companies, retirement or pension funds, hedge funds, investment advisors,

and mutual funds. Their role in the economy is to act as highly specialized
investors on behalf of others. For instance, an ordinary person will have a
pension from his employer. The employer gives that person's pension
contributions to a fund. The fund will buy shares in a company, or some other
financial product. Funds are useful because they will hold a broad portfolio of
10

investments in many companies. This spreads risk, so if one company fails, it
will be only a small part of the whole fund's investment.
Institutional investors will have a lot of influence in the management of
corporations because they will be entitled to exercise the voting rights in a
company. They can actively engage in corporate governance. Furthermore,
because institutional investors have the freedom to buy and sell shares, they
can play a large part in which companies stay solvent, and which go under.
Influencing the conduct of listed companies, and providing them with capital
are all part of the job of investment management.
1.1.3.2 Private investors
Normally, the most of investment shall come from institutional
investors with long-term view and complicated requirements. Instead, private
investors shall be engaged in shorter-term investment.
Private investors - wealthy individuals looking for a profitable return in a
viable business venture, also known as business angels or angel investors or
informal investors - will also offer networking opportunities and business
connections or sometimes take on a management role in their invested company.
“Private investors - wealthy individuals looking for a profitable return in a viable
business venture, also known as business angels or angel investors - will also offer
networking opportunities and business connections or sometimes take on a
management role in their invested company”. Nowadays, an increasing numbers
of private investors gather into angel networks (or angel groups, or sub-set of
private investors) to share information, research, and analysis; and also pool their

money to their mutual portfolio.
Mostly, angel investors usually buy smaller sums of shares and provide
necessary liquidity. Especially, for business start-up or small companies,
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where it is pretty hard to attract institutional investors, it is angel investors
that own the vast majority of a company‟s equity. Private investors are any
members who buy and sell shares in listed company. The decision making of
this buying or selling may be simple and be without any consideration or
advice from stock-brokers. However, the role of stock-brokers to private
investors is increasingly important as stock-brokers can give professional
advice, latter‟s recommendation, or, under private investors‟ needs, structure
private investors‟ investments or portfolio, and also make some certain
decisions on private investors‟ behalf under an agreement between private
investors and stock-brokers.
Private investors can also be past and present employees and their
families of a listed company itself by keeping/converting share options or
buying via company-supported program. Although most companies apply
certain restrictions on buying and selling these types of shares, most of these
shares shall become tradable.
Generally, the participation of private investors and private brokers can
be significant in pushing demand for shares, and then, enhancing the liquidity
of the shares. Therefore, private sections should be an important part in a
company‟s comprehensive investor relations program.
1.1.3.3 Analysts
Not kinds of investors but playing an important role in the market are
analysts. They actually are the “bridge” between the company and its
investors of all kinds. Analysts are the one who forecast a company‟s
performance and prospects, and set market expectations about a company‟s
potential, efficiency and future growth, and, most importantly, they shall

12

publish their opinions and analyses on a company. “Typical areas covered in
analyst reports are as below:
- Description of a company and its activities
- Comparisons with peers and read-across implications of peer
activity
- Opinions and analysis on how the company and management are
performing
- Opinions and analysis on the wider macro influences affecting the
company
- Forecasts of financials including full income statement, cash flow
and balance sheet (or summaries thereof)
- Expectations (including a target share price)
- Valuation of the company using a variety of metrics (discounted
cash flow and peer-group multiples are the most common)
- A recommendation to the reader (buy, sell or hold)
- Forthcoming catalysts and expected news-flow that support the
recommendation.”
Source: Investor relations, a practical guide, London Stock Exchange (2010)
As much as the significance of the analysts‟ voices, there are many factors
affecting their opinions, such as: sector that company is in, company‟s market
capitalization, investment community, trading volumes and stock‟s liquidity.
1.1.3.4 Media
Warren Buffett has insisted: “It takes 20 years to build a reputation
and five minutes to ruin it”. This statement has mentioned the broad
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importance of media to reputation of any organization or company. For all
businesses and sectors as well as all types of organizations or companies,

efficient communication with press and media is more and more significant.
Media here are understood: print (newspaper, newsletter and magazines),
broadcast (television, radio) and internet-based (on-line) new media (see the
figure 1.1).

Figure 1.1: Media matrix
Source: Investor relations, a practical guide, London Stock Exchange (2010)
Since seeing the significant role of media, the relationship-building
program with the media is also of much importance. A good relationship with
the media shall help the company have a bright picture with the public.
There are various ways of building relationship with the media, such as:
- One-to-one meeting: with public-relations professional who has a
kind relationship with relevant journalists and press. The company
should be very well-prepared for unexpected issues mentioned.
- Releasing key announcements (new business lines, new contracts,
Board appointments…) to the market
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- Interviews with financial journalists and journalists from well-
known newspapers, magazines…
- Crisis management in media (negative news): appears when the
media publish the negative image of a company. In this case, the
company is recommended to at first work internally to mitigate any
potential ruin or damage, and then use “issues management” to
narrow the problem to company, show a polite, helpful and truthful
manner and behavior to journalists. When a company faces hard
questions that can lead to negative news, they should consider
mentioning relevant issues (not the key issues of the question),
should not say directly on this difficult matter.
Communication with the media and press is like communication with

master communicators. This can be a rewarding or a paying experience. In all
cases, the company should be in good preparation and understanding. Then
whether positive or negative news released, the company should always show
the openness and comfort on communicating with the media.
In general, dealing with all kinds of stakeholders is never an easy work.
An investor relations program shall help a company in detailing the
characteristics and significance of the three principle investor relations
audiences: investors (institutional and private), analysts and the media. Figure
1.2 shall show the model and process of investor relations in a company.
15


Figure 1.2: The model and process of investor relations
Source: Investor relations, a practical guide, London Stock Exchange (2010)
1.2 The investor relations team
In order to generate a proper investor relations program, it is vital to
form an investor relations team and assign responsibilities. In practice, an
investor relations team shall include both internal members of a company and
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external forces, they are: company management, financial PR firm, and
investor relations consultancies.
1.2.1 Company management
Company management is the most important internal force influencing
on an investor relations program of a company. Its decisions and actions shall
affect the success as well as the failure of an investor relations strategy.
Furthermore, all kinds of shareholders also pay a lot of attention on the
operation of a company management. Investors, especially institutional
investors are eager for meeting and keeping an open communication with
company management to understand what they are really invested in.

Normally, it is Chief Executive Officer (CEO) and Chief Financial Officer
(CFO) who shall be responsible for the majority of investor relations activities of a
company. Their decisions shall get advice and information from the company‟s
consultants, and most of cases the Investor Relations Officer (IRO).
Andrew Buchanan, Fund Manager - Octopus Investments has
concluded on the role of company management: “Essentially, as investors we
are backing the management team and their ability to deliver their strategy
and provide returns for their investors. It is equally vital that the Non-
Executives are high calibre, because shareholders need them to challenge
and guide the Executives. Investors will want to have open lines of
communication with both the Executive and Non-Executive Directors and
companies should embrace this as part of their investor relations strategy, for
example by a Non-Executive offering to talk directly to shareholders without
the Executives present.”