• The Government has announced additional measures to help Singaporeans and businesses get through the 7 Apr-4 May “circuit breaker” period. The measures are incremental in nature, and mostly build upon key measures announced in Supplementary Budget 2020.
• New measures include a foreign worker levy (FWL) waiver and FWL rebate of SGD750.00 for April, and putting in place a law to ensure property owners pass on property tax rebates to tenants. While these measures will offer additional near-term relief, it does not materially change the business outlook.
• We remain OVERWEIGHT on REITS and prefer selective exposure to defensive stocks.

Financials

• We expect the measures announced in Solidarity Budget 2020 to cap the rise in Singapore’s unemployment rate in the near term, especially as the country heightens safe distancing measures over the next four weeks. This should slow the rise in home mortgage delinquency rates and delay the rise in banks’ NPL ratios. However, these ratios should still face upside risks if the “circuit breaker” period is extended.
• UOB (SGX:U11) is our preferred exposure to the sector, given its more conservative loan stance.

Property and REITs

• Although no additional targeted measures were announced for the property and REITs sectors, an enhanced Jobs Support Scheme (JSS) and cash flow & credit support for employers should help companies survive through this low economic activity period. This, we believe, should mitigate the risk of potential spikes in tenant defaults and likely increases in vacancies.
• We note that most REITs have already announced plans to pass property tax rebates to tenants in full. They have also announced additional measures to assist such tenants.
• We remain OVERWEIGHT on REITs with the following sub-sector preferences: Healthcare, industrials, office, hospitality, and retail.
• Our Top Picks: Suntec REIT (SGX:T82U), ESR REIT (SGX:J91U), and Manulife US REIT (SGX:BTOU).

Consumer

• Food & beverage or grocery retail firms under our coverage have labour-intensive business models and are heavily reliant on foreign workers. The measures announced in Solidarity Budget 2020 should help provide near-term cash flow support to these firms. The plan to implement a law ensuring full property tax rebates be transferred to tenants will ensure consumer companies can avoid tedious negotiations with landlords to secure rental support.
• Maintain sector NEUTRAL.
• Preferred sector pick: Sheng Siong (SGX:OV8), as grocery sales should remain resilient during the “circuit breaker” period.

Tech and Manufacturing

• The enhanced JSS, FWL waiver, and FWL rebate for April should enable companies to achieve additional cost savings during the “circuit breaker” period. This is on top of the 3-5% in cost savings to be achieved due to measures announced in earlier budget.
• Our sector top picks: Avi-Tech (SGX:BKY) and Fu Yu (SGX:F13).

Source: RHB Invest Research - 7 Apr 2020