Singapore 2021 Budget - UOB Kay Hian 2021-02-17: Looking Towards Recovery


Singapore 2021 Budget - Looking Towards Recovery

  • With S$11b in spending, the 2021 Budget continues to assist the recovery efforts of the Singapore economy with an emphasis on maintaining a high level of support for sectors that have been badly hit by COVID-19.
  • Importantly, we note that S$24b has been put into efforts to transform the country economically over the next 3 years.
  • We maintain our 2021 year-end STI target of 3,180 (8% upside).

Singapore Budget 2021 – Support in the short term, transformation in the medium term.

  • Singapore’s Deputy Prime Minister (DPM), Mr Heng Swee Keat delivered the 2021 Budget yesterday.
  • Key highlights from his speech include:
    1. S$11b towards continued COVID-19 relief. In the new COVID-19 “Resilience Package”, S$4.8b has been earmarked for public health and safe re-opening measures including the nationwide vaccination effort. Another S$5b will go towards continued support for firms and workers while the remaining S$1.2b will be allocated to specific sectors with the emphasis on sectors that are expected to continue to be badly affected by the pandemic.
    2. Looking forward, the Budget has allocated S$24b for economic transformation over the next three years with the broad goals being:
      1. development of a vibrant business community,
      2. catalysing capital by extending risk-sharing arrangements with financial firms, and
      3. redesigning jobs and creating job opportunities.
    3. GST increase to be implemented sometime over 2022-25. DPM Heng stated that the GST increase must still happen “sometime during 2022 to 2025, and sooner rather than later” given the onerous spending that the Government has had to undertake in the past 12 months and in the following 12 months. He noted however that S$6b has been set aside as an ‘Assurance Package’ so that the effect of the GST increase will not be felt for 5-10 years, depending on household income.
    4. Climate change and supporting the move to electric vehicles (EV). In a longer-term theme, Singapore has undertaken to support UN efforts on climate change. On a more practical front, the government disclosed various measures to promote the adoption of EVs including:
      1. aggressively raising the targeted number of EV charging points to 60,000 by 2030 vs 28,000 in the prior plan, and
      2. increasing the per litre duty on petrol.
    5. In 2020, Singapore saw a budget deficit of S$64.9b (13.9% of GDP) and significantly higher than the forecast a year ago due to COVID-19. In 2021, the budget will remain expansionary, with total expenditure projected at S$11b and an overall budget deficit of S$11b or 2.2% of GDP.


  • Support for workers and businesses. With S$25b spent on the Jobs Support Scheme (JSS) thus far and supporting 150,000 employers for up to 17 months, the government will continue with the JSS in 2021 which will cost it S$700m. Most sectors will see support until Mar 21 but as other sectors continue to suffer, the government has extended the JSS as follows:
    • Tier 1: Aviation, aerospace and tourism – 30% support for wages paid from April to June, and 10% from July to September.
    • Tier 2: Retail, arts and culture, food services, built environment (but excluding supermarkets) – 10% wage support for three months up to June.
  • Providing more targeted support for sectors that continue to be under stress. In particular, the aviation sector’s recovery will take some time with the government noting that Changi Airport’s total passenger movements were only ~2% of pre-COVID-19 levels. As a result, the government will provide targeted support and extend cost relief for the aviation sector, thus costing it S$870m. In addition, for the land transport sector, a COVID-19 Driver Relief Fund will cost the Government S$133m while the arts, culture and sports sectors will receive S$45m in a package to support capability development and sector transformation.
  • Measures to help small to large enterprises. The Enterprise Financing Scheme-Venture Debt programme, targeted at startups, is a programme where the government takes up to 70% of the risk on loans with participating financial institutions, and where the loan quantum cap will be increased from S$5m to S$8m. At the other end of the spectrum, an investment scheme targeted at large local enterprises was also announced where the government will set aside S$500m for a commercially-managed funding platform with Temasek, which will match the investment, ie S$1b in total for the fund manager to invest in non-control equity and mezzanine debt of large local enterprises.


  • No GST rate hike in 2021, but this may happen sometime in 2022 to 2025.
  • Household support package. All Singaporean households will also receive S$100 worth of Community Development Council (CDC) vouchers each, to be used at participating heartland shops and hawker centres.
  • GST will be extended to imported low-value goods with effect from Jan 23. This could affect e-commerce purchases in the short term, in which purchases could be made before the GST implementation. SingPost (SGX:S08) has a growing share of domestic e-commerce deliveries.
  • Petrol duty tax to be raised. For premium petrol, duty will be raised by S$0.15 per litre and for intermediate petrol, duty will be raised by S$0.10 per litre. A 15% road tax rebate will be provided for private cars.
  • Encouraging EV adoption. The Additional Registration Fee (ARF) floor will be lowered to zero for electric cars from Jan 22 to Dec 23.
  • Service and conservancy charges (S&CC) rebate for all eligible HDB households. The rebates will offset between 1.5 and 3.5 months of S&CC fees.
  • Initiatives to support lower and middle income families. The ComLink programme, currently piloted in several towns, will become a nationwide programme supporting 14,000 families with children, over the next two years. There will also be an additional one-off GST cash voucher of S$200 for all eligible Singaporeans.
  • Support for children. The government is looking to pilot an Inclusive Support Programme to support children with special needs. There will also be an additional S$200 top-up per child through the Child Development Account, Edusave Account or Post-Secondary Education Account for families with Singaporean children below age 21.



  • Extension of JSS. DPM Heng Swee Keat has allocated S$870m in aid for the aviation sector, which will benefit airlines and aviation support firms, including SATS, SIA Engineering and ST Engineering’s aerospace division. Specifically, companies in the aviation sector will receive 30% JSS rebate on wages of up to S$4,600 for three months from Apr 21 and another 10% JSS rebate for another three months from July.
  • The biggest beneficiary will be SIA, followed by SATS. SIA Engineering will benefit from the Holdco level as well as from JV’s and Associates.
    • ST Engineering (SGX:S63): No change to our target price for now. We will seek greater clarity on earnings impact on 19 February at its results briefing. HOLD with target price S$3.65.
    • Singapore Airlines (SIA, SGX:C6L): We have revised our target price from S$4.43 to S$4.47, valuing SIA at 1.0x average FY22/FY23’s book value. Recommendation remains a HOLD.
    • SATS (SGX:S58): We have revised our target price from S$3.96 to S$4.01, valuing the stock on a DCF basis with 6.9% WACC and 3.0% terminal growth rate. Recommendation remains a HOLD.
    • SIA Engineering (SGX:S59): We have revised our target price from S$1.64 to S$1.68, valuing the company on a DCF basis with WACC at 6.5% and terminal growth rate of 0.9%. We maintain our SELL recommendation.


  • S$100 worth of CDC vouchers to benefit food courts and supermarkets in heartlands. The government will give all Singaporean households S$100 worth of CDC vouchers to use at participating heartland shops and hawkers. We see marginal benefit for 3 companies under our coverage, Kimly (SGX:1D0), Koufu (SGX:VL6) and Sheng Siong (SGX:OV8), as they operate a significant number of outlets in the heartlands.
    • We estimate that almost all of Kimly's outlets and roughly 50% of Koufu’s outlets are located around HDB estates.
    • For Sheng Siong, we estimate > 70% of its stores are HDB units.
  • JSS for F&B players to be extended for three more months, with supermarkets excluded from the JSS. While there is a further three months’ extension of JSS for the F&B companies, the rate has fallen from 30% to 10%. Kimly, Koufu and Jumbo Group (SGX:42R) will see marginal benefits from this, on our estimates. Based on the Dependency Ratio Ceiling (DRC) for the services sector, we estimate local hires command 60-70% of its total workforce. The scheme is limited to local hires and is also subjected to a wage cap of S$3,600, which is approximately the average salary or lower for most of the labour-intensive jobs in the sector. Our back-of-the-envelope calculation indicates cost savings of less than S$0.5m for each company from the JSS scheme.


  • Extension of JSS. Following the government’s extension of the JSS by six months to Sep 21 (i.e. an additional six months of wages coverage), we estimate that Genting Singapore (SGX:G13)s savings will be around S$19.4m. This is derived from our assumptions that 6,455 of Genting Singapore’s local/PRs employees (after assuming 5% cut of local workforce in previous restructuring) with average monthly salary of S$2,500, and 30% of their salary will be supported by JSS for three months, 10% for another 3 months as Genting Singapore falls under the tourism sector.


  • Support for drivers. The government’s COVID-19 Driver Relief Fund will be up to S$133m, which will directly support drivers of taxis and private hire cars. The relief period will be up to Jun 21.
  • Extended JSS scheme. As a land transport operator, ComfortDelGro (SGX:C52) is in Tier 2 sector of the JSS for its land transport services. The extended support will be at 10% for three months, covering wages paid up to Jun 21. We estimate this would account for an additional S$8m- 10m in wage savings (approximately 4% of FY21 estimated earnings)
  • Petrol duty rates to be raised. On a short-term basis, road tax rebates and petrol duty rebates of S$360 per vehicle will be utilised to ease the transition to higher petrol duties. Overall, this will offset one year of petrol duty increases for taxis and nullify any effects on driver’s earnings. In the longer run, this could encourage the transition to electric vehicles given the government’s promotion of clean energy.


  • GST for low-value goods. Low-value goods worth less than S$400 bought online and imported by air or post will be subject to GST starting from 1 Jan 23 (all goods imported via land or sea are already taxed). GST will also be extended to imported non-digital services for consumers, such as those involving live interactions with overseas providers of fitness training, counselling and tele-medicine.
  • Levelling the playing field. Henceforth, local and overseas suppliers of goods will be subject to the same GST treatment (currently at 7%). The move to level the playing field is positive for brick-and-mortar retailers. Online sales proportion for retail sales excluding motor vehicles is 12.6% as of Dec 20. The move will help our brick-and-mortar retailers fend off competition from online merchants.
  • The initiative is indirectly positive for retail landlords, such as


  • Limited negative impact if S Pass framework is reviewed. Keppel Corp (SGX:BN4) and Sembcorp Marine (SGX:S51) have continued their efforts to raise productivity and efficiency in the past few years to offset higher labour costs to mitigate the adverse impact of Singapore's long-term restriction on foreign labour. In our view, the government’s review of the S Pass framework is likely to have limited negative impact on Keppel Corp and Sembcorp Marine.
  • JSS impact not material. On our estimates, the incremental savings on JSS for both Keppel Corp and Sembcorp Marine amount to S$3m-4m in 2021. In our view, this is not material relative to our net profit forecast of S$580m for Keppel Corp and a net loss of S$138m for Sembcorp Marine.


Key stocks impacted by Budget 2021.

Rebounding in 2021.

  • We note that UOB Global Economics and Markets Research is currently forecasting Singapore to expand by 5.0% in 2021, against the Ministry of Trade and Industry’s outlook of between 4.0-6.0%. However, the recovery in Singapore’s overall economy is expected to be uneven with likely positive news from the manufacturing cluster in 2021 countered by headwinds in the services and construction sectors.
  • Singapore’s growth outlook for 2021 will depend on several factors, including:
    1. how the COVID-19 pandemic evolves especially within the Asia Pacific region,
    2. the geopolitical environment, and
    3. global trade dynamics.

Singapore Research Team UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-02-17
SGX Stock Analyst Report HOLD MAINTAIN HOLD 4.470 UP 4.43