Singapore Supplementary Budget - DBS Research 2020-03-27: Unprecedented Anti-Viral Boost

Singapore Market Focus - DBS Research | SGinvestors.io SINGAPORE AIRLINES LTD (SGX:C6L) SATS LTD. (SGX:S58) MAPLETREE INDUSTRIAL TRUST (SGX:ME8U) GENTING SINGAPORE LIMITED (SGX:G13)

Singapore Supplementary Budget - Unprecedented Anti-Viral Boost




Extraordinary S$48bn Resilience Budget to Fight COVID-19.

  • The DPM and Finance Minister, Mr Heng Swee Kiat, delivered a Resilience Budget in Singapore Parliament response to the challenges brought on by the COVID-19 pandemic. This comes just 5 weeks after the Singapore 2020 Budget.
  • The overall supplementary budget amounts to S$48bn and coupled with the S$6bn Care and Support package announced on 18 Feb 2020, the total committed amount to fight against COVID-19 pandemic totals S$55bn, representing 11% of Singapore’s GDP.

Enhanced Jobs Support Scheme (JSS) amounts to S$13.7bn.

  • One of the key thrusts is to ensure that the livelihoods of residents are protected. The government is enhancing the Jobs Support Scheme and will provide employers a 25% cash grant (up from 8% previously announced on 18 Feb) on the gross monthly salary of each employee for nine months. This is increased from three months previously.
  • For the aviation and tourism-related, and food services sector, which are directly and deeply impacted by the virus outbreak, the JSS will support 75% and 50% of the first S$4,600 of employees’ gross monthly wages for 9 months. Further to that, the aviation sector will also receive S$350m support under the Aviation Support Package to provide cost relief for the sector as well as to maintain some level of air connectivity to allow Singaporeans to return.


Impact on STI index earnings

  • Prior to the supplementary budget we had expected earnings of STI component stocks to contract by 9% y-o-y in FY20F. With the supplementary budget leading to significant cost savings amounting to 4% for STI stocks, we now expect STI component stocks to register 5% y-o-y earnings contraction.


Aviation-related (Analyst: Paul YONG, Suvro SARKAR, Alfie YEO)


Singapore Airlines (SGX:C6L)


SATS (SGX:S58):

  • Enhanced Jobs Support Scheme for aviation sector will see S$96m in benefits to SATS for 9 months. We estimate property tax rebates of around S$5m as well. Our estimate assumes
    • SATS operates on 62% dependency ratio for its aviation segment and we estimate that it has ~7,000 Singaporeans and PRs who will be eligible;
    • a wage offset of 75% for every local worker employed applies.
  • Other benefits from the $350m enhanced aviation support package include rental rebates of
    • 20% for tenancy at Changi Airfreight Centre and
    • rent rebates for lounges and offices at Changi Airport Terminal buildings.
  • See SATS Share Price; SATS Target Price; SATS Analyst Reports; SATS Dividend History; SATS Announcements; SATS Latest News.

SIA Engineering (SGX:S59)


ST Engineering (SGX:S63)

  • ST Engineering is a diversified conglomerate with a staff strength of close to 22,000 across geographies. We estimate around 65% of staff are based in Singapore, of which around 50% would be locals. Aerospace sector will have a bigger proportion of locals on the payroll, whereas other sectors more heavily into manufacturing and marine shipyards would have higher dependency on foreign workers.
  • In total, we estimate ST Engineering would be able to obtain wage support for around 7,000 staff in Singapore, but we are not assuming 75% offset of wages, but rather 25% offset as ST Engineering’s businesses including aerospace MRO may not qualify under the additional tier of support for severely stressed businesses as ST Engineering has minimal exposure to airport operations and ground handling.
  • Taking this into account, we estimate ST Engineering to save around S$70m in staff costs in FY20. This is around 4% of ST Engineering’s overall staff costs. We estimate this could help cushion any potential decline in ST Engineering’s performance in FY20 to a significant extent. The impact on ST Engineering of course will not be as affected operationally compared to SIA Engineering, as its Aerospace division has a more diversified revenue mix with low dependence on the line maintenance business.
  • The Group itself has multiple segments with exposure to more stable government and defence spending.
  • See ST Engineering Share Price; ST Engineering Target Price; ST Engineering Analyst Reports; ST Engineering Dividend History; ST Engineering Announcements; ST Engineering Latest News.


Gaming (Analyst: Jason SUM)


Genting Singapore (SGX:G13)



Banks (Analyst: LIM Rui Wen)

  • Alleviating concerns over non-performing loans. While it is a given that credit costs and non-performing loans for both businesses and individuals will be higher y-o-y, we believe the Supplementary Budget will help businesses mitigate some cashflow difficulties in the meantime with various enhancements to Enterprise Financing Scheme (EFS), subsidies to businesses under the Loan Insurance Scheme, Temporary Bridging Loan Programme (TBLP) and EFS - SME Working Capital Loan.
  • Further, the government will also be setting aside S$20bn of loan capital to support companies with strong capabilities. In addition, the substantial enhancements to Jobs Support Scheme and Wage Credit Scheme are likely to go a long way to preserve jobs, and also help to alleviate concerns on potential defaults on mortgages (which accounts for close to a quarter of Singapore Banks’ loan book) and individual non-performing loans among Singapore banks as the economy continues to see an expected contraction. Increased co-funding of wages will likely have 1-2% positive impact on banks’ earnings.
  • See


Land Transport (Analyst: Andy SIM)


ComfortDelGro (SGX:C52)

  • Special Relief Fund of S$300/ month till Sep 2020. A Special Relief Fund payment of S$300 per vehicle per month till end September for taxi hirers will help alleviate the costs of rental. This works out to S$10 per day. This should be on top of the current rental rebates that are in place.
  • On 25 March, ComfortDelGro has announced an increase in rental rebate to S$46.50 (up from S$36.50/day) and extending it till end April. The S$36.50/ day rebate was supposed to step down to S$30/day in April. This could help to reduce the idle rate with lesser taxi hirers returning their taxis.
  • Fund to defray cost of idle fleet. $12m will also be set aside to help taxi operators defray the costs of their unhired fleet. This is expected to be pass on to drivers, which we believe ComfortDelGro has done.
  • See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.


Food Service (Analyst: Alfie YEO)

  • Relief for F&B foodservices; positive for supermarket operators. Key measure for the sector is the Enhanced Jobs Support Scheme which will impact F&B Foodservices significantly. Co-funding of wages will increase from 8% for 3 months to 50% for 9 months with monthly wage ceiling increased from S$3,600 to S$4,600. This will have a positive impact on wage cost for Koufu (SGX:VL6) and Jumbo Group (SGX:42R). On our estimates, the additional reliefs will increase to S$4- 7m from S$1-2m previously. However, downside risk to revenue and earnings prevail if travel restrictions and limited social interactions/ dining out prevail.
  • Impact on supermarkets is a net positive with the Enhanced Grocery Voucher. Jobs Support Scheme (25% co-funding) will go towards retaining headcount at supermarkets for Dairy Farm (SGX:D01) and Sheng Siong (SGX:OV8). We continue to be positive on supermarkets while maintaining our neutral stance on F&B Foodservices.


Telecom Sector (Analyst: Sachin MITTAL)



Industrials (Analyst: HO Pei Hwa)



Property Sector (Analyst: Derek TAN, Rachel TAN)


Ammunition for landlords to help tenants.

  • We believe that the enhanced property tax rebates will come as a relief to landlords as most are balancing the need to provide help to their tenants due to COVID-19 and economic downturn. At the same, this should help to stem the risk of potential tenant closures (and unwarranted vacancies spiking in the near term). The increase in property tax rebate from 30% to 100% for the most directly impacted sectors (retail, hospitality and MICE) will be timely for landlords.
  • With calls from government to pass down the rebates to the tenants, we believe most landlords will do so and provide more (on top of marketing efforts for retailers) in the immediate term. The hoteliers will also be able to mitigate near term losses as island-wide occupancies drop towards the low 30%-35% with Singapore limiting entry to tourists (passenger traffic at the airport since the lockdown has fallen more than 90%).
  • While hoteliers are seeing a slight lift in occupancies from Malaysians (who chose to stay in Singapore) post the lock-down in Malaysia and stay-home-notices (SHN) for returning travellers, average daily rates (ADR) are generally lower than usual.
  • The expansion of the tax rebates (30% of property tax) to commercial and industrial properties is also welcomed as recent channel checks suggest that industrial and office (eventually) tenants have been asking for some form of assistance (through rent rebates etc) as their own business activities are impacted.
  • Based on our estimates, the property tax rebates work out to roughly 1 month of rent for retail landlords and hospitality landlords (c.9% of revenues) and 10 days of rent for commercial and industrial landlords.

Infusing cashflow to tenants -

  • The expanded various job schemes, loan programs and deferment of income taxes for companies will improve business cash flows especially for firms in the industrial and offices property sectors. This will also mitigate the risk of systemic closures, which is a rising risk given the sharp economic slowdown in our view.
  • The various aid packages will help most landlords, but we see industrial REITs benefiting the most as we understand that tenants in the manufacturing sector have been seeking assistance from their landlords in recent times.
  • Among the industrial landlords, we believe Mapletree Industrial Trust (SGX:ME8U), with a large exposure to small and medium enterprises (SMEs) will benefit the most.

Impact to Retail landlords






Janice CHUA DBS Group Research | Kee Yan YEO CMT DBS Research | Singapore Research Team DBS Research | https://www.dbsvickers.com/ 2020-03-27
SGX Stock Analyst Report HOLD MAINTAIN HOLD 6.600 SAME 6.600
FULLY VALUED MAINTAIN FULLY VALUED 2.660 SAME 2.660
BUY MAINTAIN BUY 3.000 SAME 3.000
BUY MAINTAIN BUY 0.800 SAME 0.800



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