20140224-Maybank_KERPL-Singapore_Strategy_17页_635kb

Singapore Strategy Summary

Core Content

Singapore Budget 2014 was characterized by targeted assistance for the poor and financial incentives for SMEs to transform and restructure. The budget focused on improving healthcare affordability and enhancing SME productivity through ICT initiatives. There were no major policy changes for the property sector, and the overall budget deficit for FY14 is expected to be SGD1.2b or 0.3% of GDP, funded by past surpluses.

Main Points

• No Surprises in the Budget: The proposals were largely anticipated and aligned with the mainstream. No major implications for the stock market are expected.
• Stock Market Valuation: The Singapore market is trading at a modest valuation with a forward P/E of 13x and a historical P/BV of 1.4x. The FSSTI target remains at 3,500 by year-end.
• Preferred Sectors: Investors are advised to remain selective, with aviation services, banks, healthcare, and offshore and marine sectors as preferred choices.

Key Sectors and Impact

Healthcare

• Focus on Elderly: The Pioneer Generation Package was introduced to support Singaporeans aged 65 and above, enhancing healthcare affordability.
• CHAS Enhancements: The Community Healthcare Assist Scheme (CHAS) was expanded to include all members of the Pioneer Generation, increasing the number of eligible patients from 0.7m to 1.5m. The scheme now offers subsidies for outpatient care, Medisave top-ups, and MediShield Life subsidies.
• Impact on Private Healthcare: The expansion of CHAS should benefit private general and dental clinics, especially those with a significant number of CHAS-registered clinics, such as Raffles Medical, IHH, and Q&M.
• CHAS Subsidies: The subsidies are specifically directed at private healthcare institutions, and the new eligibility criteria are expected to increase demand for services.

Telecommunications

• ICT Initiative for SMEs: A SGD500m initiative over three years aims to support SMEs in adopting ICT solutions. It includes subsidies for fibre connections and wireless equipment.
• SME Productivity Schemes:
  • The iSPRINT Grant Scheme will support SMEs using IT for the first time, offering up to 70% subsidies.
  • The PIC scheme will be extended until 2017 and enhanced to PIC+ in 2015, allowing up to SGD600,000 in annual tax deductions for qualifying SMEs.

Construction

• Marginal Loser: The construction sector is a marginal loser due to a SGD100 increase in levy on basic-skilled foreign workers, effective from July 2016.

Top Market Picks

Large Caps

• CapitaMalls Asia (CMA): Strong market leadership with new mall openings and growth in China.
• DBS Group (DBS): Benefits from higher interest rates and internationalisation of the CNY.
• First Resources (FR): Cost-efficient producer with growth potential in CPO prices and biodiesel mandates.
• Keppel Land (KPLD): Expanding into China's residential market with potential for commercial property growth.
• SembCorp Marine (SMM): Strong orderbook and margin recovery in 2014.
• SIA Engineering (SIE): Benefits from airport capacity expansion and joint ventures with Rolls-Royce.
• Suntec REIT (SUN): Strong DPU growth and retail exposure provide a cushion against market volatility.
• Wilmar (WIL): Expected improvement in soybean crushing margins and growth in sugar division.

Small/Mid Caps

• Bumitama Agri (BAL): Fast-growing plantation company with strong FFB output growth.
• Ezion (EZI): Strong EPS growth driven by secured liftboat contracts.
• M1 (M1): Benefiting from the expansion of the ICT initiative.
• Mermaid Maritime (MMT): Potential for growth in the offshore and marine sector.
• Midas (MIDAS): High upside potential due to the ICT initiative and strong ROE.
• Nam Cheong (NCL): Growth potential in residential and commercial properties.
• OSIM (OSIM): Positioned to benefit from the expansion of the healthcare sector.
• Q&M (Q&M): Strong dental services and CHAS subsidies.
• Raffles Medical (RFMD): Significant CHAS-registered clinic network and potential for growth.

Analysts

• Ng Wee Siang: (65) 6432 1467, ngweesiang@maybank-ke.com.sg
• Gregory Yap: (65) 6432 1450, gyap@maybank-ke.com.sg
• John Cheong: (65) 6432 1461, johncheong@maybank-ke.com.sg

Summary of Key Financial Metrics

Top BUYs and SELLs

Top BUYs

• CapitaMalls Asia
• DBS Group
• First Resources
• Keppel Land
• SembCorp Marine
• SIA Engineering
• Suntec REIT
• Wilmar
• Bumitama Agri
• Ezion
• M1
• Mermaid Maritime
• Midas
• Nam Cheong
• OSIM
• Q&M
• Raffles Medical

Top SELLs

• Cache Logistics
• City Developments
• Cosco
• Genting Singapore
• Mapletree Logistics
• SMRT
• Yangzijiang

Conclusion

The Singapore Budget 2014 primarily focuses on supporting the poor and SMEs through targeted financial assistance and incentives. It provides marginal benefits to the healthcare and telecommunications sectors, while the construction sector faces some challenges. The stock market is expected to remain stable, with the FSSTI target at 3,500. Investors are advised to focus on preferred sectors such as healthcare, aviation, and offshore and marine, with specific stocks highlighted as top BUYs and SELLs.