Upcoming earnings season will determine if new quarterly reporting regime is sufficient

Singapore

AS the next earnings season - the first since compulsory quarterly reporting (QR) was dropped - draws closer, the effectiveness of the new approach will be put to the test.

Adding to the challenge is the global Covid-19 pandemic, which has created an environment where stakeholders are anxious for answers, market watchers told The Business Times.

Since Feb 7, a new risk-based approach to QR has replaced the initial reporting requirement based on companies meeting a certain minimum market capitalisation.

Under the new approach, a company has to undertake QR only if it does not have clean audit opinions or faces financial and regulatory compliance issues. The Singapore Exchange (SGX) has since disclosed a list of 109 companies that still have to undertake QR.

Against such a backdrop, a number of companies have indicated that they will be adopting semi-annual reporting.

While most companies promised proactive engagement with stakeholders as they do away with the old reporting regime, corporate governance advocate Mak Yuen Teen said that even if companies make timely continuous disclosures, the financial impact may not be adequately reflected. "Without quarterly announcements, investors will not be properly informed, and they may assume the worst," he said.

In addition, with the languishing economy amid the virus outbreak, financial information is now even more crucial to investors.

Said Yeap Jun Rong, investment specialist at Phillip Securities: "With companies facing serious financial impact, investors are looking for the numbers to have a better understanding of the impact on companies."

To be sure, it is still unclear how much information will be available in abridged disclosures and business commentaries but Prof Mak said that such disclosures may be a "poor substitute" for financial reports, especially for companies with little analyst coverage.

However, dropping QR does not absolve firms from having to update the market on material developments, said Stefanie Yuen Thio, TSMP's joint managing partner, pointing out that many companies have provided such updates.

Likewise, while Harold Woo, president of the Investor Relations Professionals Association Singapore (IRPAS) said he believes that the investment community would like SGX-listed companies to continue with quarterly reporting, firms that "display candour and keep the trust of their stakeholders" will still stand out as quality companies.

He highlighted that this is particularly important amid challenging economic conditions "because of the disruptions and supply chain problems arising from the evolving Covid-19 crisis".

But the onus is on companies to be transparent and provide timely disclosures. "Good companies know the benefits of having transparent disclosure policies in relation to their business and financial performance," said Ms Yuen Thio.

"Bad corporate citizens, even if bound by QR requirements, will obfuscate their way into murky waters," she added.

Among the Straits Times Index constituents, the majority have opted to shift to semi-annual reporting, with some choosing to provide voluntary business updates for the first-quarter and third-quarter performance.

The three local lenders, for instance, will be providing abridged financial disclosures for Q1 and Q3 instead of quarterly earnings reports.

Singapore Press Holdings, Venture Corp and Wilmar International and Genting Singapore have committed to similar measures by replacing Q1 and Q3 financial reports with voluntary business updates that include key financial information and business commentaries in a bid to help investors assess the firms' ongoing performance between half-yearly reports.

CapitaLand's sponsored entities Ascendas Reit, Ascott Residence Trust, CapitaLand Retail China Trust and Ascendas India Trust have also announced that they will be providing business updates for Q1.

CapitaLand, Sembcorp Industries, ComfortDelGro, City Developments and UOL Group will report their results on a semi-annual basis and comply with continuing disclosure obligations.

Both CapitaLand Mall Trust and CapitaLand Commercial Trust, which are in the midst of a proposed merger, will continue with QR. Yangzijiang Shipbuilding is also among index counters that has opted to continue QR.

Meanwhile, SGX, Sats, Mapletree Commercial Trust and Mapletree Logistics Trust, Singtel and SIA have yet to come to a decision.

Beyond the STI constituents, a handful of companies including Del Monte Pacific, Fortress Minerals, iFast Corporation, Micro-Mechanics and UMS Holdings, have indicated that they will voluntarily continue QR.