SINGAPORE (Apr 5): The month-long circuit breaker beginning tomorrow denotes Singapore’s commitment to slowing the transmission of Covid-19.
Although this move is visibly more stringent, market watchers are quick to note that this is by no stretch a “lockdown”.
From Apr 7 to May 4, only essential services will remain open. These include food establishments, wet markets and supermarkets, clinics, hospitals, utilities, transport and key banking services.
Singaporeans are also encouraged to stay at home as much as possible, and to avoid socialising beyond immediate family members. The government has also asked that Singaporeans only go out for essentials such as buying food and exercising at parks at a “safe distance”.
In a Monday report, CGS-CIMB Research analyst Lim Siew Khee stresses that the circuit breaker is not a lockdown, but instead a move to pre-empt escalating infections.
“The country is not locked down and remains in Dorscon Orange and not “Red” (defined as when contact tracing is hard and outbreak is uncontrollable),” says Lim.
“The government emphasised that the “circuit breaker” is not about business closures, but closing of business premises,” she adds.
In light of the circuit breaker, Lim has identified some “clear cut” names that will remain resilient.
These include supermarket stocks such as Sheng Siong Group and Dairy Farm International, hospitals such as Raffles Medical, data centre counters such as Keppel DC REIT and telcos such as Starhub and Singtel.
In particular, the brokerage is banking on both Sheng Siong Group and Singtel during this period.
Lim shares that as an essential service proxy, Sheng Siong could see stronger same-store sales growth.
“We believe our 12% yoy earnings growth for FY2020F is firm on the back of increased store count and demand from stocking up of essentials,” says Lim.
Similarly, Singtel’s core earnings per share (EPS) increases of 13.3% in FY2021 and 6.9% in FY2022 due to a rebound in associate earnings including Bharti Airtel, Globe Telecom and Intouch Holdings.
Subject to further confirmation from the government, Lim says that semiconductor stocks such as Venture Corporation, AEM Holdings, Frencken Group and UMS Holdings, too, are worth looking at.
For Venture Corporation, Lim notes that the counter’s share price has corrected some 26% since early March to price in the risks of lower guidance.
“We believe demand and production of non-consumer and life science products are relatively defensive,” says Lim.
The brokerage has also identified shipyard stocks such as Sembcorp Marine and Keppel O&M, as well as ST Engineering for investors to cash in on.
Although banks are allowed to remain open, Lim notes that some branches could be closed, which would in turn affect them adversely. “OCBC has announced that 22 out of 46 branches will be closed. UOB and DBS will provide more details on Apr 7,” notes Lim.
Looking ahead, the brokerage says that the near term remains “bearish”, and is bracing for the benchmark Straits Times Index (STI) to fall towards 2,200 points.
Amid the chaos, Lim is also encouraging investors to look at counters with limited share price downside. These include Yangzijiang Shipbuilding and Venture Corporation.
CGS-CIMB has “add” calls on Sheng Siong Group, Singtel and Venture Corporation with respective targets prices of $1.42, $3.40 and $17.66.
As at 11.20am, shares in Sheng Siong Group are trading three cents higher, or 2.5% up, at $1.25 while shares in Singtel are trading two cents higher, or 0.8% up, at $2.60.
Meanwhile, shares in Venture Corporation are trading 46 cents higher, or 3.4% up, at $13.93.
