SINGAPORE (Feb 20): RHB Research is upbeat on Singapore’s growth outlook and expects a positive “post-Budget” market reaction with a preference for exposure to the consumer, real estate, REITs and banking sectors.

In a Tuesday report, analyst Shekhar Jaiswal notes how Monday’s Singapore Budget 2018 announcement was positive for all business sectors with the exception of the Buyer’s Stamp Duty (BSD) increase for residential transactions.

Consumer sentiment, in particular, is expected to remain upbeat this year and supported by the $100-300 to be paid out to all adult Singaporean citizens out of the FY17 surplus. According to Jaiswal, the wage credit scheme extension till 202 will also be positive for companies such as BreadTalk, which has been rated “buy” with a target price of $2.09.  

See: Singaporeans to receive SG Bonus 'hongbao' as budget surplus soars to $9.6 bil

The analyst also flags ST Engineering as a key beneficiary of the announcement of strategic national projects under the Smart Nation initiative, under which the government plans to develop a sensor platform for Internet of Things (IoT) devices and a National Digital Identity system for online transaction authentication, among others.

The stock, rated “buy”, has been given a price target estimate of $4.04.

While the analyst says the introduction of a top marginal BSD of 1% for residential property was unexpected, he does not expect it to significantly dampen the housing market and instead recommends that investors look out for any weakness in share price for property developers, which would offer a good buying opportunity.

In his opinion, the additional quantum is still “small” in comparison to overall property prices, thus enabling the market to absorb the additional stamp duty.

“There is ample liquidity in the market from recent en-bloc sales, coupled with positive sentiments surrounding bullish land bids by developers. This should sustain the uptick in near-term property sales momentum,” he adds.

CapitaLand and APAC Realty have been rated “buy” with the respective target prices of $4.20 and $1.20 – with Jaiswal anticipating the latter to benefit from an expected rising in HDB resale transactions following the government’s announcement of higher Proximity Housing Grants (PHGs).

“We believe developers could counter the move [additional BSD] by building more compact residential units and maximise the units with absolute quantum of less than $1 million. We continue to maintain our expectation of 3-7% increases in residential property prices for 2018,” explains Jaiswal.

See: Top marginal buyer's stamp duty for residential properties raised to 4%

See: Government revises Proximity Housing Grant (PHG) criteria to within 4km

Also, now that REIT exchange-traded funds (ETFs) will be no longer subjected to tax on the specified income that is distributed to unit holders, Jaiswal sees more REIT ETF-based products to hit the market in the near-term, which would help widen the investor base and boost the liquidity for Singapore REITs (S-REITs).

On this note, RHB’s top picks are Ascendas REIT, OUE Hospitality Trust and Manulife US REIT which have target prices of $2.90, 95 cents and 98 US cents respectively.

As at 9.54am, shares in BreadTalk, ST Engineering, CapitaLand and APAC Realty are trading at $1.66, $3.32, $3.60 and $1.04 respectively.

Units of A-REIT, OUE HT and Manulife US REIT are trading at the respective prices of $2.59, 86 cents and 92 US cents.