Singapore Strategy - CGS-CIMB Research 2021-05-04: Rinse And Repeat

SHENG SIONG GROUP LTD (SGX:OV8) UG HEALTHCARE CORPORATIONLTD (SGX:8K7) DAIRY FARM INT'L HOLDINGS LTD (SGX:D01) RIVERSTONE HOLDINGS LIMITED (SGX:AP4)

Singapore Strategy - Rinse & Repeat

Singapore is reinstating pre-emptive phase 2 safety measures from 8 to 30 May to avoid the repeat of a circuit breaker.
With FSSTI at 3,179 and trading at mean valuations (14.4x CY22F), we think profit taking is likely in the short-term among the year-to-date outperformers.
Short-term losers: DBS (SGX:D05), OCBC (SGX:O39), SATS (SGX:S58), SIA (SGX:C6L), ComfortDelGro (SGX:C52), retail REITS, Genting Singapore (SGX:G13), Jumbo Group (SGX:42R).
Winners: SEA, Sheng Siong (SGX:OV8) and Dairy Farm (SGX:D01), UG Healthcare (SGX:8K7), Riverstone (SGX:AP4) and industrial REITS (Mapletree Logistics Trust (SGX:M44U), Keppel DC REIT (SGX:AJBU), Ascendas REIT (SGX:A17U), Mapletree Industrial Trust (SGX:ME8U)).

Singapore is re-entering phase 2 with tightening measures to be implemented from 8 May to 30 May to avoid a circuit breaker (CB), although the government is not ruling out the possibility. Some of the reinstated measures include
- Capping social gatherings to 5 per group (from 8) and workplace capacity at < 50% (from 75%).
- Stay-at home notice for inbound travellers from most countries will be extended to 21 days (from 14 days).
- Pre-event testing will be required for more than 100 attendees at any time, capped at 250 attendees. These include cinemas and worship services.
- Border closure started on 1 May for travelers from Bangladesh, Nepal, Pakistan and Sri Lanka.

The number of locally transmitted COVID-19 cases and unlinked community cases has increased in recent weeks, with 60 new cases and more variants detected from South Africa, UK, India and Brazil. There were also re-infection cases with the South African variant. Relative to the onset of COVID-19 in Feb/Mar 20, Singapore now has far better testing and contact tracing capabilities.
As of 18 Apr, 2.2m people have been vaccinated with the first dose and 849k are fully vaccinated.

We see some profit taking in banks and travel-related stocks (SIA (SGX:C6L) and SATS (SGX:S58)) given their year-to-date outperformance.
Reduced activities would impact
- transport stocks (ComfortDelGro (SGX:C52), SBS Transit (SGX:S61)),
- retail REITS (Frasers Centrepoint Trust (SGX:J69U), Mapletree Commercial Trust (SGX:N2IU), SPH REIT (SGX:SK6U), Starhill Global REIT (SGX:P40U), Lendlease REIT (SGX:JYEU) and Suntec REIT (SGX:T82U)) as well as
- other re-opening beneficiaries (Genting Singapore (SGX:G13) and Jumbo Group (SGX:42R)).
Office REITS are less affected from existing hybrid work-from-home/ office structure.
Sentiment among developers and realtors could be slightly affected if transaction volumes take a breather from more virtual vs physical viewings.
SGX (SGX:S68) could be neutral on peak ADV.

The uncertainty over a potential lockdown could see a renewed interest in pandemic beneficiaries -
- SEA Limited,
- supermarkets (Sheng Siong (SGX:OV8) and Dairy Farm (SGX:D01)) and
- glove sector (UG Healthcare (SGX:8K7), Riverstone (SGX:AP4)).
A heightened pace of testing is likely to benefit healthcare proxies
- Q&M Dental (SGX:QC7) and
- Raffles Medical (SGX:BSL).
Industrial REITS (Mapletree Logistics Trust (SGX:M44U), Keppel DC REIT (SGX:AJBU), Ascendas REIT (SGX:A17U), Mapletree Industrial Trust (SGX:ME8U)) could offer some shelter. These REITS outperformed the FSSTI in Mar-May 20.
We keep our end-FY21 FSSTI target at 3,140 points, based on 14.2x 12M forward P/E for now.

LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2021-05-04

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.600 SAME 1.600

ADD MAINTAIN ADD 1.700 SAME 1.700

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