Date
22 August 2017
Investors are concerned that a large number of companies might be made redundant by new technologies. Photo: Reuters
Investors are concerned that a large number of companies might be made redundant by new technologies. Photo: Reuters

Cheap valuation no longer key in the new era

I attended a forum held by the Singapore Exchange last week. The forum was about how local firms can attract investors from Hong Kong and mainland China.

The Hong Kong market is widely considered as a success story in local business circles.

During the forum, I realized that many listed firms there continued to put emphasis on valuation above everything else and they wondered why low valuation failed to draw investors.

I believe they have to improve their investor relationship, and more proactively communicate with investors about their future plans. Investor trust can only be built over time.

Nevertheless, communication does not guarantee better valuations. Nowadays, the stock market has become increasingly divergent. Investors are concerned that a large number of companies might be made redundant by new technologies.

We have already witnessed what Amazon has done to the retail industry.

In that case, when communicating with investors, corporate executives need to tell investors how they can survive the fast-changing technology and thrive in a constantly evolving business environment.

Even companies in traditional businesses should also try to adapt to the new era. I have given the example of a packaging company, which replaced bar code on the packaging with QR code. That has substantially facilitated data collection and tracking. That may not improve its bottom line immediately, but the move would at least bring new opportunities.

Nowadays, investors’ approval and funds are much harder to win.

Meanwhile, Singapore-based gaming device maker Razer plans to raise US$600 million from an initial public offering in Hong Kong, with a valuation of US$2 billion. The company has yet to report a profit, but I think it will draw much attention.

This article appeared in the Hong Kong Economic Journal on Aug. 1

Translation by Julie Zhu

[Chinese version 中文版]

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RT/RA

Director, Asset Management at Ample Capital Limited.

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