The Singapore government announced its Budget 2014, with the focus primarily on thanking and honouring the pioneers of Singapore. The unprecedented S$8b pioneer fund consists of health-care benefits for some 450k pioneers for the rest their lives. Also included were measures to help older workers and elderly Singaporeans as well as address the health-care cost concerns of tomorrow’s seniors. For the corporates, the government has extended the PIC (Productivity and Innovation Credit) scheme to 2018, which gives tax breaks for firms that improve their processes, among other measures. Overall, we think that the Budget would be most positive to the health-care sector; hence we maintain our OVERWEIGHT on the sector, with Raffles Medical (BUY, S$3.61 FV under review) as our top pick. Other businesses may experience slightly higher manpower cost with the 1% point increase in employer’s CPF contribution (which will go into Mediasave). We note that the levy for Basic Skilled/R2 Work Permit Holders will be increased from $600 to $700 in Jul-16, while levies for Higher Skilled/R1 Work Permit Holders will remain unchanged. Meanwhile, the unexpected hike of 25% on alcohol tax could impact F&B outlets that rely heavily on sale of alcoholic drinks.

Source: OCBC Research - 24 Feb 2014