Investors in the Nigerian Capital Market have been advised to invest in companies with strong fundamentals, sustainable growth and profitability to ensure enhanced returns on investment.
Tolu Oluwole, Head, Investor Relations of FBN Holdings (FBNH) Plc stated this at the Capital Market Correspondents Association of Nigeria (CAMCAN) virtual forum on Wednesday in Lagos.
Oluwole urged retail investors to go beyond speculative buying and invest in stocks with strong fundamentals, sound management and potentials for growth.
He said the COVID-19 pandemic and downturn in the stock market provide an opportunity for investors to cash-in.
According to him, investing in good companirs like FBN Holdings at this critical period is key hedge for Investors against future uncertainty.
Oluwole noted that opportunities abound inin any market downturn, urging investors to key into the present opportunities in the equities market.
“At this time of economic challenge, we have seen an increase in the domestic retail and institutional investors participation in the market,” he stated.
On the exit of foreign investors, Oluwole said they would soon find their way back to the market in a matter of time with strong business fundamentals.
In his presentation titled, ‘Financial media and engagement with Retail Investors’, he said there were a number of different investors with varied levels of interest in a company’s investment story.
He noted that while the majority of the audience have broadly similar requirements, there are subtle differences and it is critically important to ensure consistency in the messages to avoid misinterpretation.
He described retail investors as non-professional market participants who generally invest smaller amounts than larger institutional investors.
He also noted that individual investors were thought to be less knowledgeable, less disciplined, less skillful, and prone to behavioral and emotional decisions, saying that despite their lack of knowledge, the retail investment space was enormous with individuals.
He added that knowing and understanding potential investors was very crucial when presenting the equity story and consider having a fair balance of investor type, saying that Investor Relations (IR) plays a pivotal role in providing detail about the health of an organisation to a wide range of interested parties.
According to him, the information disseminated through IR not only projects the financial and operational strength of the organisation, but also enables a two-way relationship between the Company and its stakeholders.
“The increase in stakeholder interest from optimal Investor Relations will ultimately result in an increase in the market value of the organisation, as long as the company delivers on its operational performance, noting the environment.
“Company’s day-to-day interface include institutional and retail shareholders, bondholders, credit and equity analysts, the Exchange, and the financial media. The principal role is to manage interest from these audiences and ensure they are fully informed about the performance of the business as well as identifying potential issues to address proactively.
“Ultimately, the primary goal for IR is to improve the markets’ understanding of the company’s investment proposition, enhance investors’ confidence, attract capital, positively impact trading and reduce funding costs over the longer term.”
He added that the IR entails the ability to work closely with all areas of the business including: Finance, Risk Communications and various Operational teams.
“In FBNH, we have different type of investors and management has developed value in building capacities and highlighting the underlying investment proposition through channels to key stakeholders.
“We have got retail investors of 50.9 per cent and domestic institutional investors of 31.8 per cent , foreign institutional is 16.7 per cent and we engage in all inclusive engagement programme through timely information on our website, email to provide response in conjunction with the registrar, meetings with shareholders, among others,” he said.
Oluwole said that FBNH had embraced digital approach in reaching out to its retail investor in conjuction with its registrar, amid COVID-19 pandemic.
“We have moved things away from physical meeting to virtual meetings and we must always keep our communication line open to engage with our investors,” he said.
He explained that the company in 2019, demonstrated management efficiency with NPL ratio of about nine per cent.
He urged Capital Market Correspondents to continue to ensure good understanding of businesses in the financial community and bridge any perceived gap between businesses and the retail investor.
Oluwole said the media need to work together to deepen understanding and bridge the knowledge gap with emphasis on the capital market.