Singapore Market Focus - DBS Research 2020-04-07: Standing In Solidarity

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Singapore Market Focus - Standing In Solidarity

• S$5.1bn Solidarity Budget to help businesses and households tide through Circuit Breaker month.
• Wage support - Relief for UOB (SGX:U11), OCBC (SGX:O39), SingTel (SGX:Z74), StarHub (SGX:CC3), ComfortDelGro (SGX:C52), SPH (SGX:T39), SingPost (SGX:S08).
• Foreign worker waiver/rebate - Relief for Sembcorp Marine (SGX:S51), Keppel Corp (SGX:BN4), Raffles Medical (SGX:BSL).
• Additional S$300 cash handout positive for Sheng Siong (SGX:OV8), Dairy Farm (SGX:D01), SingTel (SGX:Z74) and StarHub (SGX:CC3).

Offering a lifeline.

• The Singapore government has introduced a third Solidarity Budget worth S$5.1bn aimed at saving jobs and protecting livelihoods during the month-long ‘circuit breaker’. The ‘circuit breaker’ involves only the opening of essential services such as food establishments, wet markets and supermarkets, clinics, hospitals, utilities, transport and key banking services.
• Singaporeans are encouraged to stay at home as much as possible, and to avoid socialising beyond immediate family members during this period.
• S$4bn goes towards additional support for businesses and workers while S$1.1bn is for Solidarity payment to Singaporeans. Singapore stands ready to save jobs and ensure that businesses survive during this uncertain period. The latest budget will draw S$4bn from past reserves.
• The three COVID-19 support budgets over the past two months cost a total of S$59.9bn (12% of GDP). The overall budget deficit for FY20 will rise to S$44.3bn (8.9% of GDP).

Cost savings for businesses

• Companies in sectors other than travel/tourism with a relatively high employee count such as banks (UOB (SGX:U11), OCBC (SGX:O39)), telcos (SingTel (SGX:Z74), StarHub (SGX:CC3)), transportation (ComfortDelGro (SGX:C52)), SPH (SGX:T39) and SingPost (SGX:S08) will find relief in the 75% (from 25%) wage support for local employees for April.
• The waiver of foreign worker levy due in April and S$750 foreign worker levy rebate for each work permit or S pass holder provide relief for sectors such as yards (Sembcorp Marine (SGX:S51), Keppel Corp (SGX:BN4)), healthcare (Raffles Medical (SGX:BSL)) and construction.
• However, a bill to ensure landlords pass on the property tax rebate “in full” to tenants is neutral at best for retail (CapitaLand Mall Trust (SGX:C38U), Frasers Centrepoint Trust (SGX:J69U)) and industrial REITs.

Lower risk for banks.

• The government’s decision to raise its risk share of Temporary Bridging Loan Programme, SME Working Capital Loan and Trade Loan Businesses to 90% (from 80%) lowers the risk for banks (UOB (SGX:U11), OCBC (SGX:O39)).

Support for households.

• Supermarkets Sheng Siong (SGX:OV8) and Dairy Farm (SGX:D01) stand to gain further from an additional S$300, for a total of S$600, to all Singaporeans above the age of 21.
• The additional cash will come in handy to meet the need for higher data capacity in the home environment that benefits SingTel (SGX:Z74) and StarHub (SGX:CC3).
• See also previous report: Singapore Supplementary Budget - DBS Research 2020-03-27: Unprecedented Anti-Viral Boost.

Kee Yan YEO CMT DBS Group Research | https://www.dbsvickers.com/ 2020-04-07

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