Singapore's real estate investment trusts (Reits) that issue dividends every quarter are in talks with investors about how semi-annual reporting could affect dividend payouts, the Straits Times understands.

Many of the 43 Reits listed in Singapore report earnings and issue dividends every quarter.

But an increasing number, especially those with many properties overseas, have moved to semi-annual reporting and payouts.

The issue is in focus after the Singapore Exchange (SGX) said on Thursday that it will drop the requirement that all companies with a market capitalisation exceeding S$75 million (US$55.6 million) must report their earnings every quarter.

Many Reit managers will have to decide whether to make the move or not.

Quarterly reporting was imposed in 2003 and now almost 600 of the 850 companies listed on the SGX have to comply – a task that is deemed onerous, time-consuming and costly.

But only about 100 or so companies will have to do this after February 7.

These will be firms seen as at risk under guidelines applied by SGX Regulation. This list will be reviewed quarterly.

All other listed firms can file financial reports every six months.

OCBC Investment Research head Carmen Lee believes the big-cap companies may continue to report quarterly, and keep paying quarterly dividends. “Otherwise, this will collapse into twice yearly.”

A poll by Credit Suisse Equity Research found “overwhelming support” for the abolition of mandatory quarterly reporting.

But the decision to move towards semi-annual reporting will depend on investor feedback and practical considerations, including distribution of quarterly dividends, said Gerald Wong, head of Singapore equity research at Credit Suisse.

Institutional investors are generally ambivalent, noted associate professor Mak Yuen Teen of the National University of Singapore Business School.

“They feel more strongly about dual-class shares than whether there’s quarterly reporting as they invest in larger companies where analyst reports are often available and they can meet management in one-on-one meetings,” he said.

“Retail investors are probably overwhelmingly against dropping quarterly reporting as they are often invested in smaller companies and don’t have one-on-one meetings generally.”

But industry observers said investors should take comfort in senior management being now able to focus on longer-term business and investment strategies, and that rules on timely material disclosures will continue to apply even after quarterly reporting is abolished.

Short-termism is a concern in the case of quarterly reporting, said Stefanie Yuen Thio, joint managing partner of TSMP Law Corporation.

“While all management teams try to grow the business over a longer-term horizon, there is always pressure to ensure that the quarterly numbers are healthy, and this may lead to certain transactions being timed to fit into the reporting schedule,” she noted.

Property developers could gain from the scrapping of quarterly reporting as they will have “more flexibility in managing their topline and timing their property launches”, said Investor Relations Professionals Association of Singapore president Harold Woo.

CapitaLand’s group chief financial officer Andrew Lim said this rule change will encourage investors to focus more on the sustainability of CapitaLand’s earnings.

It also signals to the market that the SGX has heard the feedback that compliance costs can be prohibitive for smaller companies seeking a listing and is prepared to address this without loosening the reins on corporate governance, Yuen Thio said.

For smaller-scale companies, the costs savings per quarter could be around S$200,000 to S$300,000, said Gibson Dunn & Crutcher partner Robson Lee. Bigger companies with a number of foreign subsidiaries could save up to S$1 million or more.

THE STRAITS TIMES (Singapore)/Asia News Network