Singapore Market Strategy - CGS-CIMB Research 2021-07-20: Unexpected Setback; Reopening Themes Could See Weakness

Singapore Market Strategy - CGS-CIMB Research | SGinvestors.io RAFFLES MEDICAL GROUP LTD (SGX:BSL) Q & M DENTAL GROUP (S) LIMITED (SGX:QC7)

Singapore Market Strategy - Unexpected Setback; Reopening Themes Could See Weakness

  • Singapore returns to Phase 2 Heightened Alert from 22 Jul to 18 Aug. Dining-in is suspended, group sizes for social gatherings back to 2 (from five).
  • The measures are similar to those imposed in 16 May-13 Jun. Community cases hit all-time high of 182 on 20 Jul. FSSTI could be soft in the short term.
  • Pandemic beneficiaries: Sheng Siong (SGX:OV8), Raffles Medical (SGX:BSL), Q&M Dental (SGX:QC7), SGX (SGX:S68), iFAST (SGX:AIY).
  • We keep our end-2021F FSSTI target at 3,488 points.

Disappointing setback

  • Given the multiple COVID-19 clusters in night life establishments, the Jurong Fishery Port and several wet markets and hawker food centres, coupled with in-community COVID-19 cases rising to an all-time high of 182 cases, Singapore reverted to stricter measures of suspending dining-in and social gathering limit of two pax.
  • Large-scale events of 100 pax require pre-event testing (PET); no PET required for up to 50 pax. Shopping malls and showrooms’ occupancy limit has again been reduced to one person per 16 sq m of gross floor area (GFA) from 10 sq m.
  • Over the period of 12-18 Jul, the government detected an average of 46 community cases per day, the highest number of cases detected since Apr 2020. The difference between this season vs the one in May-Jun is the rapid spread to a wider spectrum of population including many seniors.
  • The government will provide a support package to affected businesses and workers similar to the support provided in the previous Phase Two (Heightened Alert, HA). We expect rental waivers for eateries in government-owned premises and targeted job support scheme to be announced.

COVID-19 vaccination on track but full reopening could stall

  • As of 18 Jul, ~48.2% of Singapore’s population have been fully vaccinated, on track vs the targeted 50% by the week of 26 Jul. The next milestones – to fully vaccinate two-thirds of the population by 9 Aug, and 75% by end-Sep or early-Oct.
  • Although the vaccination progress is on track, we think the government could take extra precautions towards a full economic reopening, especially the lifting of travel restrictions. We had previously expected the nation’s borders to be gradually reopened from Oct/Nov but this reversion to Phase 2 (Heightened Alert) could stall the plan to Dec or early-2022F.
  • Average daily COVID-19 tests in Singapore stood at 90.7k/day in the week of 12 Jul and likely to accelerate given the multiple clusters.

Sentiment could be weak, but relatively more resilient vs region

  • We expect market sentiment to be slightly weak but see some pandemic beneficiaries, such as Sheng Siong (SGX:OV8), Raffles Medical (SGX:BSL), Q&M Dental (SGX:QC7), SGX (SGX:S68), and iFAST (SGX:AIY).
  • During the period of previous similar Phase 2 (Heightened Alert), FSSTI rose 1%, with property, banks, manufacturing and healthcare sectors outperforming. The current unexpected Phase 2 (Heightened Alert) could see some selling pressure. Our country picks that revolve around reopening themes such as SATS (SGX:S58), Frasers Centrepoint Trust (SGX:J69U) and UOB (SGX:U11) could see weakness until the next milestone is achieved.
  • Our end-2021F FSSTI target is still based on 0.5 standard deviation above 10-year mean CY22F P/E of 15.3x (it currently trades at 13.8x CY22F vs 14% core EPS growth).
  • Relative to the region, Singapore may still be relatively better in terms of control over COVID-19 spread, hence a differentiating factor.

LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2021-07-20
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