The Budget 2024 saw a “comprehensive” set of measures to ensure Singapore will deliver a 2-3% annual GDP growth rate over the next decade, and to help Singaporeans weather the impact of higher costs, according to RHB Bank Singapore.
Following this, RHB’s analyst Shekhar Jaiswal has an “overweight” call on the consumer, industrials, manufacturing & tech, REITs (hospitality, industrials office & overseas), and transport sectors. Meanwhile, he has a “neutral” call on the financial, plantations, healthcare, real estate, retail REITs and telecommunications sectors.
On his overweight calls, Jaiswal says that the additional $600 community development council (CDC) voucher, $200-$400 in cash as one-off cost-of-living special payments for eligible adults and additional one-off rebates for eligible HDB households will help support consumption demand, especially in the mass market and downstream sub-segment.
In view of the handouts potentially enhancing consumption power, the analyst is positive on consumer staples companies such as ShengSiong and Kimly 1D0 .
Frasers Centrepoint Trust should be the key beneficiary of this package, says Jaiswal, while CapitaLand Integrated Commercial Trust C38U remains the best proxy to retail-cum-office exposure to Singapore. In the mid-cap space, Starhill Global REIT P40U is still the best proxy to capture higher tourist spending-led growth, with the bulk of its portfolio located along Singapore’s Orchard Road.
Jaiswal notes that the government’s refundable investment credit — a tax credit with a refundable cash feature will support high-value and substantive economic activities, like the expansion of manufacturing facilities, new innovation and R&D activities, and activities in support of the green transition.
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The government will also increase the commitment towards research, innovation, and enterprise 2025 by $3 billion. This should help sustain the country’s investments in research, innovation, and enterprise at about 1% of gross domestic product (GDP), he notes.
The analyst also highlights the government’s increased defence spending, which he believes ST Engineering will benefit from. The firm has a “sizeable exposure” to Singapore and global defence spending, and strong capabilities in cybersecurity, he adds.
In addition, the analyst notes that the government mentioned that a critical mass of leading semiconductor companies based in Singapore which operate across the value chain, from design, wafer fabrication, to assembly and testing.
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Singapore is now a key node in the semiconductor supply chain – accounting for more than 10% of the global semiconductor market, and 20% of semiconductor equipment in the world.
“As such, we believe 2024 will be the start of the technology recovery cycle, where stocks within the sector could see a rerating on stronger orders. Companies that could see an impact are Frencken Group E28 and UMS Holdings 558 ,” says Jaiswal.
On his neutral calls, Jaiswal says that the government top up of the financial sector development fund by $2 billion will improve core areas of banking, capital markets, asset management, and insurance, and also build capabilities in new areas like fintech, as well as
green and transition finance.
“Overall, we think the announced measures are a net positive, albeit marginal, for the banks,” says the analyst. He maintains his view that a peaking rate cycle, coupled with potential rate cuts in 2H2024 means that the sector’s earnings momentum is expected to stall in 2024.
But if the bottomline is elevated, this should be supportive of dividend yields. The analyst recently upgraded DBS to a buy due to improved clarity with respect to its shareholder returns commitment, and is waiting to hear more from United Overseas Bank U11 (UOB) and OCBC Bank
(OCBC) in their upcoming results briefing over the next two weeks.
Meanwhile, Jaiswal says that the one-time medisave bonus of $300 for adult Singaporeans should result in a positive for private platers, due to the rapidly ageing population.
“The adjustments to the per capita household income thresholds of the country's healthcare and associated social support subsidy schemes should enable more families to access healthcare services from private healthcare players that are part of these subsidised programmes,” he says. “We see Raffles Medical Group BSL and IHH Healthcare Q0F as some of the key beneficiaries.”
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However, he maintains his neutral call as he notes that there are concerns about cost inflation and a decline in Covie-19-related revenue. The majority of these costs will probably be absorbed by service providers, in his view, putting pressure on near-term margins, but the recent expansion by healthcare service providers like Raffles Medical Group into Vietnam and China should continue to support longer-term earnings growth, he adds.
On the real estate sector, Jaiswal expects a very slight positive impact to developers from the slight downward revision on additional buyers stamp duty (ABSD) as most of the listed developers have largely sold their inventories and do not face any significant risks.
“We expect 2024 to be a slow grinding year for the real estate sector, with further moderation in property prices. Key catalysts remain a healthy economy and resilient household balance sheets, with headwinds being increasing supply and higher interest rates,” he notes.
City Developments remains his top pick, as he believes the landbank is well spread across segments and regions of Singapore, and he sees limited inventory risks at this juncture. Its hospitality portfolio investment properties are also expected to continue to do well.
Finally, the government’s plans to upgrade the nationwide broadband network will further spur development of new AI-driven use cases and enterprise and retail smart solutions.
“Singtel and StarHub CC3 are well positioned to capitalise on the investments with new cloud-centric converged offerings. This comes on the back of the on-going transition from a capex to an opex-led model, which offers better unit economics and a better customer value proposition,” says Jaiswal.
However, Singtel remains his top pick, being a regional sector bellwether and core telco portfolio constituent.
