Singapore Strategy - CGS-CIMB Research 2020-05-27: #4 Help Package ~ More Cushioning

Singapore Strategy - CGS-CIMB Research | SGinvestors.io GENTING SINGAPORE LIMITED (SGX:G13) SATS LTD. (SGX:S58) SINGAPORE TECH ENGINEERING LTD (SGX:S63)

Singapore Strategy - #4 Help Package ~ More Cushioning

  • We were positively surprised by the government’s generous new S$33bn help package. Job Support Scheme (+S$2.9bn) to be extended by 1 month (10 months total).
  • Job Support Scheme up from 25% to 75% for aerospace and construction, 50% for retail and offshore & marine. Material incremental effects for ST Engineerin, SIA Engineering, Keppel Corp and Sembcorp Marine.
  • A new bill in Jun 20 will help qualifying SMEs — 4 months of rental relief equally shared by landlords and government. Slight negative for retail REITS.


S$33bn Fortitude Budget; COVID stimulus: S$92.9bn (19.2% of GDP)

  • Anticipating a worse recession (with the downward revision of Singapore’s GDP growth forecast to -7 to -4% from -1 to -4% previously), the government announced the fourth budget to support the economy. The new S$33bn help package includes a S$13bn contingency fund, and will further draw S$31bn from the country’s reserves (total drawdown YTD: S$52bn).
  • Total COVID-19-related stimulus stands at S$92.9bn, or 20% of GDP. The Budget deficit for FY20 will now be S$74.3bn (15.4% of GDP).


S$2.9bn enhancement in Job Support Scheme; total: S$23.5bn



S$2bn grant for SME tenants and new bill for 4-month rental relief

  • A S$2bn cash grant to be disbursed from end-July 2020 for qualifying SME tenants (turnover not more than S$100m p.a.) in commercial properties (0.8-month rental rebate) and offices and industrial properties (0.64 months). Landlords are required to pass this rebate on to their SME tenants. Together with the property tax rebate announced earlier, retail tenants will get about 2 months of rental relief.
  • A new bill will also be passed in Jun 20 to mandate landlords to grant four months of rental waiver to SME tenants that suffered significant revenue drops in the past few months. This will be equally shared between the government and landlords. If passed, we think the incremental impact could be less than 2 months of rental rebates, as most retail REITs have announced 1-1.8 months of out-of-pocket rental rebates so far.
  • Mapletree Commercial Trust (SGX:N2IU) has announced 2.5 months of out-of-pocket rental rebates. It is neutral to slightly negative for office and industrial landlords as tenants in essential services remained in operation during the circuit breaker period.


Keeping our FSSTI target of 2,495 (1.4% downside)

  • From the help announced, we deduce that the economy could enter into phase 2 of re-opening by Aug (phase 1: 2 Jun). Generous government stimulus is likely to prevent the FSSTI sliding to its previous crisis levels.
  • Our FSSTI target on 12x CY21F P/E, -2 s.d. of its mean since 2008.





LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2020-05-27
SGX Stock Analyst Report ADD MAINTAIN ADD 0.760 SAME 0.760
REDUCE MAINTAIN REDUCE 2.560 SAME 2.560
ADD MAINTAIN ADD 3.650 SAME 3.650



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