“Share price will go up and down, but my reputation, once down, will never go up!”

These are the words of Armstrong Industrial’s Deputy CEO, Steven Koh. I clearly remember Steven saying this to a room full of analysts and fund managers back in 2008. Those words resonated with me and I wasn’t alone.

Armstrong’s attention to detail and its excellent disclosure standards, led one analyst to describe them as the “Best Managed Small Cap”. In addition, the company won numerous Transparency Awards.

There are many ways to “grow” your reputation when things are going well. The real proof of the proverbial pudding is, can you stand up and be counted when things are not going well? It’s tough for a major shareholder and an owner of the company to say that things are not going well. You know the analysts are going to have a blaring “Sell” call on their next report. Your share price will tumble, and the next thing you know, the bankers will be calling your poor CFO!

How you disclose the issues your company is facing can lead to higher valuations once things improve. Armstrong went from a PE of 4-6X to a company trading in the teens at its peak.

There is an art to it, but essentially you can follow these simple steps:

Take ownership – Highlight the issues to the investment community and categorize it. Is it an industry wide issue or is the problem due to some form of mismanagement?

Devise a communications strategy – Draw up a plan to rectify the issues and come up with milestones that the investment community can follow.

Analyst and Shareholder Engagement – Communicate these plans to the investment community on a regular basis. It is imperative that the milestones that you set are achievable and measurable.

Reinforce – Nobody likes it when people say “I told you so”… But this is one time you should! When you hit your milestones your credibility and reputation grow.

These steps seem simple enough, but I’ve seen many listed companies make the same mistakes time and time again. They skirt around the issue and eventually their reputations are damaged. This eventually leads to the long-term disenchantment of the investment community, which often results in dropped analyst coverage and a share price in the doldrums.

Kamal is a Director and Head of Singapore Operations
Connect with him at kamal@financialpr.com.sg