Capital Market Awards
Best Investor Relations Award – Small Cap Companies With Less Than LKR10 Billion Market Capitalization
- Based on market feedback, CFA Society Sri Lanka Capital Market Awards Committee decided to present an award for the best investor relations practices followed by a listed company with less than LKR10 billion market capitalization.
- The reason for the new award is to recognize small cap companies that have been practicing good IR practices, despite not having the same level of budgets like their large counterparts and also to encourage similar companies to up their IR practices going forward.
- In the evaluation of this award winners, the committee relaxed certain criteria used for mid-large cap companies being cognizant with the smaller companies’ capabilities to invest in similar level of IR practices.
BEST Investor Relations Award
OBJECTIVE : Recognize companies that practice active Investor Relations (IR) to communicate interactively with the investor community and encourage best practices in IR
Short Listing Committee
- Asanka Herath
- Asanka Jayasekera, CFA
- Bimanee Meepagala
- Sanjeewa Fernando
- Raynal Wickremeratne
- Trisha Pieris, CFA
- Dimantha Mathew
- Oshadha de Vas Gunasekara
- Vindhya Jayasekera, CFA
- Navin Ratnayake
Award Committee
- Nadika Ranasinghe, CFA (Chair)
- Deshani Wijeyaratne, CFA
- Radhika Ratnayake, CFA
- Samanmalie Herath, CFA
- Nishendra Herat, CFA
Process
- Companies are shortlisted based on two categories – large to mid- caps and small caps, on the strength of their IR practices and responsiveness
- A wider group comprising of analysts from stockbroking firms, fund managers and institutional investors are surveyed to rank the shortlisted companies.
- Evaluation Criteria
- Accessibility of management
- Quality, transparency and fairness in disclosure
- Consistency of the IR function under all economic conditions
Commendations By The Judges
- Increasingly more companies are using virtual/hybrid analyst briefings and investor meetings to provide regular updates to both institutional and retail investors
- Increased investor relations activity by some of the small-cap companies, which is an encouraging trend. In recognition, an award has been presented this year for the best investor relations by a listed company with less than LKR10 billion market capitalization.
- More companies are making available their analyst forums/briefings recordings online enabling viewing by a larger audience
- Some companies have posted their earnings calls/forums on the Colombo Stock Exchange (CSE) website and the committee believes this is an effective platform for other companies also to share their investor presentations with a wider community.
Areas For Further Improvement
- There is a need for most listed companies to adopt basic IR practices over and above the minimum guidelines stipulated by regulators
- Companies should engage in good investor relation practices irrespective of economic cycles and company performance. There is a marked tendency to halt investor engagement during a downturn.
- Listed companies should use their websites more effectively to disseminate relevant information to the wider investor community
- Some companies continue to engage with a selected investor community, with very little information is disseminated to the wider investor groups
- Listed Companies to publish details of upcoming investor/earnings briefings including log-in details on CSE or on their own website to encourage wider participation
Best Stockbroking Research Team Award
OBJECTIVE: Reward teams working to develop research as an integral component of the investment decision-making, targeting fundamentals-driven, informed and efficient capital markets; Promote provision of high quality and timely research to all market participants
Panel Of Judges
- Thilan Sampath, CFA(Chair)
- Tharinda Jayawardena, CFA
- Asanka Herath
- Abdul Azeez, CFA
- Suranga Sarukkali, CFA
Process
- One-on-One Interviews with a panel of Judges
- Survey among institutional investors
Evaluation Criteria
- Depth of analysis & breadth of coverage
- Accuracy in forecasts and facts
- Quality of research
- Industry knowledge and sector experience
- Frequency, time to market and fairness in dissemination of research
- Innovation in research methods
- Ethical behavior with respect to investment advice & actions
- Initiatives towards investor education
Commendations By The Judges
- Special mention to NDB Securities for being ranked number #1 for ethical behavior in the survey among the institutional investors
- Increased focus on macro economic research to assist clients in navigating the markets amid the economic crisis in Sri Lanka
- Use of communication methods such as podcasts, webinars, video based reports to broaden the reach of fundamental research
- Continuing to engage in investor education despite the challenging operating environment
- Ongoing focus on the adoption of technology to improve efficiency in the research process and quality of research
Key Observations
- Declining standards in fundamental research in the sell side brokerage industry
- Deterioration of core research skills among the analyst community
- We have observed that these factors have contributed to poor reasoning, fundamental errors as well as inconsistent coverage maintenance.
Areas For Further Improvement
- Refocusing on in depth fundamental company and industry research
- Investing in talent retention and analytical skill development in the sell side research industry
- Further steps to enhance research independence and objectivity
Best Unit Trust Fund Award
OBJECTIVE: Recognize and reward fund management companies that place unit holders interest first, provide adequate disclosures to the existing and prospective unit holders to make an informed decision, adopt stringent risk management and compliance practices and implement other best practices in Asset Management
Panel Of Judges
- Ruvini Fernando (Chair)
- Dhinali Pieris, CFA
- Tharinda Jayawardena, CFA
- Kanishka Perera
- Rusiru Abeyasinghe
Process
- All unit trust funds with a minimum 5-years history were evaluated based on publicly available information and documents requested by the committee
- Funds were requested to make presentations to committee covering its investment process, operations and compliance and procedures among others
Evaluation Criteria
- Quality of disclosures and availability of information to the public
- Investment management, risk management and compliance processes and practices
- Diligence and transparency in managing investments
- Risk adjusted returns for the 5 years ending 31.03.2023
Commendations By The Judges
Concerted efforts by some funds to reach out to a wider investor base to create awareness
- Digital access being improved for investors
- Willingness to disseminate more information on electronic media, share insights etc.
- Investment strategy has adapted to current market conditions
- Efforts taken to understand investor appetite and level of risk tolerance
Concerns/Observations
- Some Explanatory Memorandums did not have benchmarks, risk parameters and more detailed information
- On governance, there are overlaps in management roles between different companies in the same group
- Lack of fund manager and performance reviews in Annual Reports and Fact Sheets
- Access to reports such as Fact Sheets, Annual Reports and Semi Annual reports limited. Not available online and available only on request
- Explanatory memorandums not up to date, important information such as benchmark, governance process followed etc. are missing
- Performance benchmarks used did not reflect the risk/return profile of the investment strategy
- Governance processes not adequately explained and does not consider finer points (e.g. large investor impacts)
- Some Annual Reports do not carry any narratives, others don’t explain the variations in performance
Areas For Further Improvement For The Industry
- Make investor entry threshold values more affordable
- Increase retail participation and broad base the investor base
- Increase sales channels
- Demonstrate less reliance on related party and large corporate accounts
- Improve balance between retail AUM and corporate AUM
- Encourage GIPS compliance and obtain certification
- Improve quality of reporting and explain performance in detail
- Ensure that all public documents are available and accessible via the website
Best Sector Report Award
OBJECTIVE: Reward and recognize analysts producing best in class sector research. Promote best practices in fundamental equity research, thereby ensuring an informed and efficient capital market.
Panel Of Judges
- Buddhika Fernando, CFA (Chair)
- Vijith Karunaratne, CFA
- Lourdeena Kudaliyanage, CFA
- Suranga Sarukkali, CFA
- Gayani Tennakoon, CFA
- Niraj Muthukuda, CFA
Process
- Initial shortlisting by 2 judges evaluating each submission
- Shortlisted reports ranked by all judges
- The Main Evaluation Criteria were:
- Industry Overview and Regional Comparison
- Industry Attractiveness
- Competitive Landscape
- Industry Challenges/Risks
Commendations By The Judges
- Congratulate research teams for producing sector reports under the difficult circumstances in 2022
- Commendation for undertaking primary research to enhance the depth and quality of analysis
Areas For Further Improvement For The Industry
- In times of unprecedented volatility – address the elephants in the room – discuss the outlook for the sector under the multiple potential scenarios that could play out
- Need for convincing arguments on how growth stories / valuation re-ratings can translate into earnings growth and share price increase for specific companies
- When using newer formats (with power-point-like slides), need a clear, well-signposted story arc, to facilitate following the argument without an accompanying presenter
Best Equity Research Report Award
OBJECTIVE: Reward and recognize analysts producing best in class equity research Promote best practices in fundamental equity research, thereby ensuring an informed and efficient capital market
Panel Of Judges
- Buddhika Fernando, CFA (Chair)
- Vijith Karunaratne, CFA
- Lourdeena Kudaliyanage, CFA
- Suranga Sarukkali, CFA
- Gayani Tennakoon, CFA
- Niraj Muthukuda, CFA
Process
- Initial shortlisting by 2 Judges evaluating each submission
- Shortlisted reports evaluated and ranked by the entire panel
The Main Evaluation Criteria Were
- Company overview, ESG, management and share dynamics
- Financial analysis
- Valuation
- Industry overview and competitive landscape
- Investment risks
Commendations By The Judges
- Congratulate research teams for producing in-depth reports on companies under the difficult circumstances in 2022
- Commend effort of carrying out primary research resulting in greater analytical depth
- Commend the addition of a section on ESG in most of the reports
Areas For Further Improvement For The Industry
- Actionable reports that answer the ‘why invest now’ question
- Accuracy in valuation methods and financial reporting
- Need to address factors that drive the current, unprecedented volatility
- Risk analyses – comprehensive, customised for the company, objective and data-driven (analytical in nature beyond a visual matrix or ‘Risk Management’ section of a company’s annual report)
- Scenario analyses – should include some form of bear case analysis for stressed macro-economic fundamentals, with transparent assumptions
- Mitigating factors should be clearly articulated
- Disappointed to see SPaG (spelling, punctuation and grammar) errors in many reports at this stage of our industry
Esg Award Update
OBJECTIVE: Recognize companies that demonstrate excellence in sustainability reporting across environment, social and governance factors
Eligibility
Only listed companies in Sri Lanka are eligible for this award.
Process
Two step process of shortlisting
Round 1
Listed companies are invited to apply and respond to a survey/questionnaire on their ESG reporting/disclosure practices, sustainability initiatives etc
Round 2
- Companies are shortlisted by the judging committee on the strength of ESG reporting practices (based on application responses)
- Shortlisted companies will be invited to a brief presentation/interview with the panel of judges to outline their ESG disclosure practices, commitment by leadership towards sustainability
- Evaluation Criteria
- ESG strategy/sustainability strategy (integration with business model)
- Quality and transparency of reporting/disclosures against KPIs, progress
- Adoption of frameworks / other regional and global sustainability standards and initiatives
- Governance disclosures (commitment of leadership, disclosure of risks)
- Only publicly available information will be accepted for judging