Singapore Budget 2019 - CGS-CIMB Research 2019-02-19: Strategy Note

Singapore budget 2019 - CGS-CIMB Research  | SGinvestors.io SINGAPORE TECH ENGINEERING LTD (SGX:S63) COMFORTDELGRO CORPORATION LTD (SGX:C52)

Singapore Budget 2019 - Strategy Note

  • Our impression of the 2019 Singapore budget is non-radical. The further tightening of foreign labour policies is not materially negative, cushioned by automation grants.
  • There was no sugar tax or details on e-commerce tax as expected by consensus.
  • Stocks with positive implications: SINGAPORE TECH ENGINEERING LTD (SGX:S63, ST Engineering) on more spending in physical and cyber defence; COMFORTDELGRO CORPORATION LTD (SGX:C52) could indirectly benefit from higher excise diesel duty.



Further tightening of labour policies cushioned by automation

  • SME and foreign labour-dependent sectors will not see an alleviation of the tightening of foreign labour policies, especially in the service sector, as the government is reducing the Dependency Ratio Ceiling from 40% currently to 38% from 1 Jan 2020 and 35% in 2021. S Pass Sub DRC will be reduced from 15% to 13% in 2020 and 10% in 2021.

What we think:



Emphasis on security and cyber defence

  • The government will continue to invest a significant amount of resources, c.30% of total expenditure to support defence, security and diplomacy efforts. Digital defence has been incorporated as the sixth pillar of Total Defence. This bodes well for ST Engineering’s electronics and land systems divisions.


Continued restructuring of diesel taxes

  • Excise duty for diesel will be raised by S$0.10/litre to S$0.20/litre immediately. Annual Special Tax on diesel taxis will be reduced by S$850 permanently.
  • We could see c.S$7m in cost savings for ComfortDelGro but this is likely to be passed through to drivers in rental rebates (up to S$1.70 per day). The positive is the accelerated pace of switching from diesel to hybrid taxi models (c.27% of ComfortDelGro’s taxi fleet is hybrid; c.9% higher rental rate).


Bicentennial Bonus to help lower-income Singaporeans

  • 1.4m Singaporeans (lower-income) will receive up to S$300 in GST vouchers and 10% of total Workfare Income Supplement schemes with a minimum payment of S$100. Personal income tax rebate of 50% of YA2019 tax capped at S$200 per tax payer. Unlike previous years’ handouts, we think this may not spur overall spending.


S$8bn Merdeka generation (born in the 1950s) health package

  • We see limited benefits for the private sector. The handout comprises MediSave top-ups (S$200 per person annually for five years starting 2019), more subsidies for MediShield Life Premiums (5-10% off annual premiums) and outpatient care for life (particularly for common illnesses, chronic conditions and dental procedures). This is broadly similar to the 2014 S$8bn Pioneer Generation Package.
  • These subsidies are only applicable at polyclinics, public specialist outpatient clinics, and registered GP/dental clinics (e.g. RMG, Q&M Dental).





LIM Siew Khee CGS-CIMB Research | https://research.itradecimb.com/ 2019-02-19
SGX Stock Analyst Report ADD MAINTAIN ADD 3.940 SAME 3.940
ADD MAINTAIN ADD 2.740 SAME 2.740



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