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Quarterly reporting, dividends and growth at listed companies

ON Jan 9, Singapore Exchange Regulation (SGX RegCo) announced it would take a risk-based approach to the quarterly reporting requirement for SGX primary-listed companies, also referred to as issuers.

This means that the majority of Singapore-listed stocks need only do semi-annual reporting, though they are encouraged to consider providing voluntary business updates to shareholders or unitholders in between their half-yearly financial reports.

Other global exchanges have made similar moves to reporting requirements in recent years.

With the new risk-based approach in Singapore, 109 companies currently have to undertake quarterly reporting.

Singapore-listed companies can of course continue to report quarterly, and we have seen a recent example of that intention flagged in the current reporting season.

For instance, on Feb 8, when Micro-Mechanics (Holdings) announced 14.4 per cent year-on-year (yoy) growth in its Q2FY20 net profit to S$3.6 million, it noted that after due consideration, its board had elected to continue with the quarterly reporting.

Dividends

Singapore-listed companies can also continue to distribute dividends on a quarterly basis.

Currently there are approximately 30 companies with a recent history of distributing dividends each quarter.

DBS Group Holdings made headlines when it reported a 9 per cent yoy rise in Q1FY19 net profit, and paid a dividend of 30 cents per share with its board deciding that, from FY19, dividends will be distributed quarterly, rather than semi-annually.

As explained in a Practice Note, the announcement of a dividend or passing of dividend, not accompanied by the release of the results may send signals on a company's financial performance for the relevant period.

With the changes to quarterly reporting effective Feb 7, the relevant Practice Note now details that dividend announcements are permissible without being accompanied by the results for the relevant period, if the issuer is able to fulfil the following conditions:

  • The issuer must have a committed dividend policy to announce dividends on a quarterly basis, and such policy must have been communicated to shareholders or unitholders;
  • The issuer must confirm, for each dividend announced for the first or third quarter of the financial year, that after making payment of the dividend, the issuer has sufficient financial resources to fulfil its liabilities as and when they fall due; and
  • In the case of an issuer that is a corporation, it must confirm, for each dividend announced for the first or third quarter of the financial year, that the corporation complies with or will comply with relevant corporate law requirements in its place of incorporation to pay dividends out of profits.

Issuers also have an obligation to make immediate disclosures of material information under Rule 703, which will include a material development that will cause dividends to significantly deviate from expectations based on previous announcements, or if no dividend is paid.

Representing regular income streams, dividend distributions are an important component of stock market investing within Singapore.

Singapore also maintains the highest dividend yield across the FTSE Country Indices of the Asia-Pacific.

The FTSE Singapore Index maintained a 4.58 per cent yield at the end of January, compared to 2.34 per cent for FTSE Japan, 3.96 per cent for FTSE Australia and 3.20 per cent for FTSE Hong Kong.

Moreover, as many as 11 of the 12 months of 2019 saw at least one Straits Times Index (STI) stock pay a dividend, and the months that had the most impact on the STI's dividend returns were May and August.

Investors can keep updated on company/issuer intentions on the SGX corporate announcements page.

Growth

There are plenty of opinions across the world that some companies (both listed and non-listed) may put too much focus on short-term profits, detracting from their long-term growth plans.

To that end, there are opinions that taking a risk-based approach to quarterly reporting requirements can help to put more focus on the longer-term growth.

This was deliberated a few years back in Europe amid initiatives that were design to support growth across the European Union.

Back in 2013, the European Union (EU) made quarterly reporting optional for companies in the bloc's 28 member countries.

Coincidentally, soon after the directive, in June 2014, the European Central Bank (ECB) introduced negative interest rates for the first time ever, when it lowered its deposit rate to -0.1 per cent.

In Singapore, there are leading examples where companies/issuers have been able to pursue long-term growth while at the same time, report quarterly results.

CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT) have been reporting their quarterly results since listing respectively in July 2002 and May 2004.

When CMT listed in July 2002, the retail Reit owned three shopping malls - Tampines Mall, Junction 8 and Funan The IT Mall with a portfolio value of S$900 million.

As at the end of 2019, CMT's property portfolio comprised 15 quality shopping malls, with a total portfolio valuation of S$10.4 billion (not including its 40 per cent interest in Raffles City Singapore).

Similarly, when CCT listed in May 2004, it owned a portfolio of seven commercial properties in prime CBD locations, with a combined value of S$2 billion.

As at the end of 2019, CCT's property portfolio value was S$11.1 billion comprising a portfolio of eight prime commercial properties in Singapore and two properties in Frankfurt, Germany.

The annualised unit price and dividend-inclusive returns of the two stocks, since their initial listings have been approximately 10 per cent.

On Jan 22, the managers of CMT and CCT proposed a merger to create a diversified commercial Reit, named CapitaLand Integrated Commercial Trust (CICT).

The merger will provide CICT an enlarged balance sheet and a higher debt headroom, which according to the CEO of the manager of CCT, will provide greater financial flexibility to power organic and inorganic growth through more proactive asset enhancements and larger investments.

Regular updates on the proposed merger are accessible on the SGX Corporate Announcements page.