Singapore Strategy - CGS-CIMB Research 2020-09-23: Returning To The New Normal

COMFORTDELGRO CORPORATION LTD (SGX:C52) CAPITALAND MALL TRUST (SGX:C38U)

Singapore Strategy - Returning To The New Normal

Singapore is easing the Phase 2 circuit breaker as employees can return to the office from 28 Sep with limitations (not more than half of the working hours/staff strength).
This move is not a surprise given the low community cases (about 1/day). Some beneficiaries: ComfortDelGro (SGX:C52), SBS Transit (SGX:S61), Lendlease REIT (SGX:JYEU), CapitaLand Mall Trust (SGX:C38U), Mapletree Commercial Trust (SGX:N2IU), Frasers Centrepoint Trust (SGX:J69U) and Koufu (SGX:VL6).

FSSTI trades close to -0.5 s.d. of mean with c.40% of the stocks at -1 and -2 s.d. of mean. We think the easing of measures could re-rate some value stocks.

In view of the well-controlled COVID-19 cases (less than 30 total new cases with less than two in-community cases in the past week), Singapore is ready to ease some of the measures imposed during the Phase 2 circuit breaker.
The Ministry of Manpower has issued some guidelines to ease the transition of employees back to the office. Work from home and safe distancing measures are still the default. For employees whose jobs can be performed from home, employers must ensure that they continue to do so for at least half their total working hours. Employers must also ensure that no more than half of employees who are able to work from home are at the workplace at any point in time, to limit the crowd. There are also guidelines on staggering start-times (after 10am) and lunch hours and split teams to avoid congestion. Companies should continue to conduct virtual meetings as much as possible. Physical meetings between employees and with suppliers/contractors should be minimised.
From 3 Oct, all religious organisations will be allowed to conduct worship services and up to 100 guests are allowed for weddings (from 50 pax currently).

The government is also piloting a new business travel pass for senior executives in Singapore with regional or international responsibilities who need to travel regularly for official and business purposes. Travellers on this pass will be required to abide by a strict controlled itinerary when they travel overseas for work.
Upon return, the traveller will be given the option of doing a COVID-19 test in lieu of Stay-Home Notice and self-isolate until the COVID-19 test result is received. The number of passes will be strictly limited in the initial phase with consideration to expand if successful and safe.

If the above is executed well, we believe public transport ridership could return to c.90% of pre-Covid levels by mid-2021. SBS Transit (SGX:S61) rail ridership rose to c.55% of pre-Covid levels in Aug (Jul: 50%). Accordingly, we believe ComfortDelGro (SGX:C52) could also benefit.
With more people returning to the office and social activities, downtown retail malls, malls located at MRT stations, and eateries should see improving traffic flow. These include Lendlease REIT (SGX:JYEU), CapitaLand Mall Trust (SGX:C38U), Mapletree Commercial Trust (SGX:N2IU), Frasers Centrepoint Trust (SGX:J69U) and Koufu (SGX:VL6).
At 2,481, FSSTI trades at 11.8x CY21F P/E, below mean of 14.3x. FSSTI should react slightly positive on the easing of Phase 2.
Rotation of interests could return to some of the large-cap value names at -1s.d. (e.g. DBS (SGX:D05), Genting Singapore (SGX:G13), Jardine Matheson (SGX:J36), Keppel Corp (SGX:BN4), SATS (SGX:S58), SGX (SGX:S68), Venture Corp (SGX:V03), Yangzijiang (SGX:BS6)) and -2 s.d. (e.g. Dairy Farm (SGX:D01), OCBC (SGX:O39), UOB (SGX:U11)) of mean. See Fig1 in PDF report attached below for details.

LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2020-09-23

SGX Stock Analyst Report ADD MAINTAIN ADD 1.700 SAME 1.700

ADD MAINTAIN ADD 2.260 SAME 2.260