SGX-listed firms should be like DBS, be brave with forward guidance

[SINGAPORE] Investors in the local bourse will soon have a slew of quarterly or half-yearly results announcements to digest.

Financial report cards provide a useful summary of a company’s performance. For one thing, the upcoming results announcements might capture some of the impact of the oil price spike due to the war on Iran.

However, many investors will be keen to know not just the latest on a company’s performance, but what the future prospects are.

Generic statements

Unfortunately, numerous companies hardly provide any useful information on prospects in their results announcements.

When discussing the outlook, some companies highlight the economic outlook for Singapore or make generic statements blanketed with bland pronouncements of “executing core strategy”, “prudent capital management” and “exploring growth opportunities selectively”.

In my view, giving broad and general statements when discussing prospects is a wasted opportunity.

Both existing and potential investors want forward guidance with some level of granularity from boards of directors and management of listed groups. 

Sure, research analysts of brokerage houses may provide financial projections for the entities that they cover. Still, certain companies are not well covered by equities analysts and retail investors may find difficulty accessing broker reports.

Importantly, a projection done with care and provided in good faith by a company’s board and management, given their deep involvement in the business, could be more credible than equities analysts’ views of future prospects.

Rightly, the Singapore Exchange Regulation encourages companies to provide forward guidance. 

Investors have loads of information to digest. A listed company which communicates clearly on matters of importance to investors, such as anticipated earnings, will greatly help investors in their decision-making.

Indeed, some companies share loads of information and beautifully presented slides as well as visuals, but not information that investors value such as forward guidance. 

Role models

Kudos to those who provide useful earnings guidance.

In announcing its results for 2025, the board of directors of the manager of Stoneweg Europe Stapled Trust (Sert) said barring unforeseen circumstances and based on current market conditions and anticipated transactions timing, it currently expects distribution per stapled security (DPS) for 2026 to be broadly in line with that of 2025.

In the release of results for the first three months of 2026, CEO of DBS Group Tan Su Shan shared that its full-year guidance for 2026 is largely unchanged. Earlier, in its release of full-year results for 2025, she shared that net profit for 2026 could come in slightly below that of 2025.

Among various observations shared when announcing Q1 results, Tan noted total income for 2026 should be around 2025 levels, the impact of greater rate headwinds on group net interest income is largely mitigated, and commercial book non-interest income growth could be in the high single digits.

Certainly, giving forward guidance on DPS may be relatively easy for the board of Sert’s manager as locked-in leases on the trust’s properties provide earnings visibility. Also, Sert has no near-term debt maturities and much of its interest rate exposure is hedged.

The bulk of revenue of many real estate investment trusts (Reits) comes from contracted leases with fixed rental rates. Thus, Reits, for one, should be well-placed to provide fairly accurate earnings guidance.

Nevertheless, if DBS, with its sizeable and complex operations, can provide forward guidance, many other listed entities with less complex operations should be able to do likewise.

Indeed, as companies typically have rigorously prepared financial projections for internal use, providing investors with forward guidance, which need not be verified by external auditors, may hardly require much additional work.

Incorrect assumptions

Of course, any projection of the future can go wrong if key underlying assumptions turn out to be incorrect.

An energy shock driving a sudden spike in jet fuel costs might change the financial outlook for airlines. 

An unexpected health pandemic which brings international travel to a halt can make earnings projections of hospitality-related entities and airlines go askew.

Unanticipated harsh housing market cooling measures could abruptly change the outlook for property players who are active in residential development.

Still, just because unforeseen events may occur, that cause forward guidance of entities to be incorrect, does not mean boards of listed entities should avoid providing such guidance.

Trust investors to be generally fair-minded and reasonable. If a company provides forward guidance and shares the key assumptions clearly, investors will likely not find fault with the company should projections not pan out because unexpected events render assumptions used to be incorrect.

Initiatives such as the Equity Market Development Programme to catalyse investor demand and the Value Unlock programme to help listed companies strengthen investor engagement and sharpen shareholder value creation, are helping to inject vibrancy to the local bourse.

Still, a local investor today has a wide choice of domestic-listed stocks and can also easily invest in overseas-listed stocks, including those of entities exposed to the artificial intelligence revolution or the space economy. Also, a myriad of other investment instruments compete for investors’ attention.

While managing risks, delivering solid results and getting strategy right are non-negotiable, boards and management of local-listed entities also need to excel in investor relations.

Sure, any forward guidance provided may be wrong. Nevertheless, boards should boldly embrace providing forward guidance in good faith as this can give an entity a competitive edge in investor outreach. 

Ultimately, providing earnings guidance signals confidence and builds credibility with investors. May boards of local-listed entities go on the offensive and do more to help investors by courageously sharing earnings projections.