SG Budget 2021 - CGS-CIMB Research 2021-02-16: Time For Singapore Corporates To Buck Up On Growth & Cost Controls

SINGAPORE AIRLINES LTD (SGX:C6L) | SGinvestors.io SINGAPORE AIRLINES LTD (SGX:C6L) SATS LTD. (SGX:S58) SIA ENGINEERING CO LTD (SGX:S59) SINGAPORE TECH ENGINEERING LTD (SGX:S63) GENTING SINGAPORE LIMITED (SGX:G13)

SG Budget 2021 - Time For Singapore Corporates To Buck Up On Growth & Cost Controls

  • Singapore’s Budget 2021 is relatively a non-event vs the generous packages in 2020. Singapore corporates need to buck up on growth and cost controls.
  • SIA, SATS, SIA Engineering, Genting Singapore and ST Engineering get incremental relief from the extended Job Support Scheme (JSS), but the impact is limited to 2-4% of FY22F opex.
  • GST rate hike from 7% to 9% to take place between 2022 and 2025 (we think 2023 is likely). E-commerce GST will take effect from 1 Jan 2023.
  • We keep our 2021 year-end FSSTI target of 3,068 points, based on 14.2x forward P/E.



Travel border reopening hope by Sep 21?

  • The Job Support Scheme (JSS) will be extended by six months for Tier 1 sectors (aviation, aerospace and tourism), i.e. firms to receive 30% support for wages paid in Apr-Jun 2021, followed by 10% for wages in Jul-Sep 2021. Firms in Tier 2 sectors (retail, arts and cultures, food services and construction) will see the JSS extended by three months (10% support) for wages paid in Apr-Jun 2021.
  • Beneficiaries:
  • We believe the tapered wage support of 10% in Jul-Sep 21 could mean partial travel border reopening at Changi Airport. Other sectors such as marine and supermarkets will not see the JSS extended beyond Dec 20/Mar 21.


Focusing on locals

  • Focusing on the local workforce is key as the government also stepped up the Jobs Growth Incentive (JGI) to S$5.2bn (from S$3bn) to extend the hiring window till end-Sep 2021. The JGI salary support is for the first S$5k gross monthly wages paid to new local hires.
  • The government will also reduce the S-Pass sub-dependency ratio ceiling (sub-DRC) for manufacturing sectors from 20% to 18% from 1 Jan 2022, and to 15% from 1 Jan 2023, similar to the marine and construction sectors as announced in Budget 2020.


Going green; petrol duty up

  • S$30m is set aside over the next five years for electric vehicle (EV) related initiatives, such as measures to improve charging provisions on private premises. The Additional Registration Fee (ARF) floor will be lowered to zero for EVs from Jan 2022 to Dec 2023. The ARF is paid when registering a vehicle, and the rate is determined by its open market value.
  • The petrol duty rate will be raised with immediate effect. Premium petrol duty is up S$0.15 per litre and intermediate petrol is up S$0.10 per litre.
  • The government will lead in issuing green bonds and has identified up to S$19bn worth of public sector green projects.


E-commerce tax, GST hike in 2022-2025

  • The GST rate hike (from 7% to 9%) will not take effect in 2021 but in 2022-2025, subject to the economic outlook. GST is critical to meet rising healthcare spending needs. We think the hike could be in 2023F, assuming recovery is intact.
  • Singapore will extend GST to imported low-value goods via air or post from 1 Jan 2023 to ensure a level playing field for local businesses vs cross-border e-commerce platforms. This could potentially be a speed bump in the growth of e-commerce penetration in Singapore when implemented.
  • Under our coverage, SEA Limited (SE US) could be affected, but minimally given that Singapore remains a small contributor to its earnings.


Budget 2021's implication on SGX listed stocks






LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2021-02-16
SGX Stock Analyst Report ADD MAINTAIN ADD 4.890 SAME 4.890
ADD MAINTAIN ADD 4.300 SAME 4.300
HOLD MAINTAIN HOLD 1.780 SAME 1.780
ADD MAINTAIN ADD 4.000 SAME 4.000
ADD MAINTAIN ADD 1.050 SAME 1.050



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