Excerpts from CGS-CIMB report

Analysts: Lim Siew Khee & the Singapore Research Team

■ Singapore further extended its Covid-19 circuit breaker period by four weeks to 1 Jun. Only the ‘most’ critical essential services will remain open.

■ Extension of the circuit breaker period could further dampen the economy; our economist revised her 2020 GDP growth forecast from -2.6% to -6.8%.

■ Our end-CY20F FSSTI target of 2,050 remains, still based on 9.5x CY21F market P/E, 20% downside from the current 2,554 pts.


Negative for Singapore developers. The private residential market will remain quiet in the absence of new launches. Moreover, sales at ongoing launches are also likely be adversely impacted during this period.

Accordingly, we see downside risk to our current 2020 volume sales projection of 8,000-9,000 units as cautious sentiment persists.

In addition, with most construction sites remaining closed during this period, we expect minimal development activities to take place.

The slower pace of progressive residential recognition, together with a softer retail and office rental market, will likely drag down developers’ earnings.

Hospitality REITs
Neutral to Hospitality REITs. The extension would have minimal impact on the hospitality REITs as Singapore has banned short-term visitors since 23 Mar 2020.

Given the low occupancy rate (51% in Feb 2020 even before the visitor ban), the hospitality REITs are likely to be just receiving minimum rents in Singapore.

Land transport sector
Negative for CD. We expect ComfortDelgro to extend its full taxi rental waiver until 1 Jun.

400taxisWe estimate that the full rental waiver will cost CD an additional S$19m in lost revenue and push its Singapore taxi operations further into the red, but we believe it is a crucial move for CD to retain its taxi fleet through the Covid-19 crisis.

We also expect public transport ridership to remain low in May with the further tightening on essential services.

We believe CD’s rail segment will be hit harder than its bus segment. We estimate the extension of the circuit breaker period to impact CD's FY20F EPS by another c.7%.

Consumer staples
Positive for Sheng Siong and Dairy Farm. Supermarkets will be able to continue their operations under extended circuit breaker period as they are considered an essential service.

We estimate SSG will reap additional S$0.8m0.9m in levy rebates for May from extension of enhanced JSS.

SSG with its estimated 35-40% foreign labour workforce could also receive at least another c.S$0.8m-0.9m of rebates (1-1.2% of net profit) from the extension of foreign worker levy, in our view.


Food & beverage
Negative for Jumbo. F&B companies are generally still allowed to operate, although some services may be suspended (e.g. standalone stores thatpredominantly sell beverage, packaged snack, confectionery and dessert) as government aims to cut the proportion of workforce still commuting to work from 20% currently to 15%.

Jumbo Group, which is a restaurant operator, is likely to be impacted more significantly by the circuit breaker measure, compared to mass-market dining options including food courts and coffee shops.

With the extension of circuit breaker measure, we see likelihood of further SSSG assumption cuts.

Given that most of its operating expenses are relatively fixed, the operating deleverage from extended circuit breaker measure could cause significant earnings impact for FY20F.

Positive for RFMD. While government support has largely been directed towards public healthcare resources, we think private healthcare players (like Raffles Medical Group (RFMD) ) could also benefit from the wage support scheme and foreign worker levy rebates and waivers.

RFMD has a workforce of 500-600 nurses and 280- 300 allied health workers; it incurred c.S$250m in staff costs in FY19 in Singapore. We see the potential for private hospital operators to rise to the challenge and help offload the burden on public healthcare infrastructure during the extended circuit breaker period.

Tech manufacturing
Neutral for AEM and VMS. There are no changes to the essential list of manufacturing services for the tech industry.

AEM and Venture Corp have already secured approval to continue operations under the circuit breaker period.

Nevertheless, should the government call for a reduction in the allowable workforce going forward, that may result in delayed production and affect the 2Q earnings of both companies.

Full report here. 

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