SINGAPORE (Apr 7): In the latest Solidarity Budget, finance minister Heng Swee Keat announced a one-off Solidarity payment of $600 will be given to all Singaporeans in April to help tide through the ‘circuit breaker’ period, which has commenced today and is expected to end on May 4.

Heng said the additional payments will cost the government an additional $1.1 billion.

The ‘circuit breaker’ involves only the opening of essential services such as food establishments, wet markets and supermarkets, clinics, hospitals, utilities, transport and key banking services. Singaporeans are encouraged to stay at home as much as possible, and to avoid socialising beyond immediate family members during this period.

According to DBS Group Research, supermarkets Sheng Siong and Dairy Farm stand to gain further from the $600 distributed to all Singaporeans above the age of 21. The additional cash will also come in handy to meet the need for higher data capacity in the home environment that benefits SingTel and StarHub.

CGS-CIMB Research also like Sheng Siong, as it an essential service proxy, which is likely to see strong same-store sales growth. “We believe our 12% y-o-y earnings growth for FY20 is firm on the back of increased store count and demand from stocking up of essentials,” says analyst Lim Siew Khee, who has an “add” call on the stock with a target price of $1.42.

CGS-CIMB also has an “add” recommendation on Singtel with a target price of $3.40, as the research house forecasts the group’s core EPS to recover, with 13.3%/6.9% y-o-y growth in FY21/22, due to a rebound in associate earnings (+38.2%/+18.3% y-o-y), led by Bharti Airtel, Globe Telecom and Intouch Holdings.

Phillip Capital, on the other hand, is not so upbeat with Singtel, as it has removed the stock from its model portfolio due to intense competition in Australia after the NBN migration and fears of renewed mobile competition after the Vodafone-TPG merger.

On the whole, Maybank Kim Eng has downgraded its full year GDP growth forecast to -6% (from -2.3%), as the circuit breaker will shut down about 30% of the economy for a month. The Covid-19 recession will be far deeper than the Asian Financial Crisis (-2.2%) or Global Financial Crisis (-3.1%). 2Q GDP growth will likely contract in a magnitude of about -16% from a year ago. The Solidarity Budget will help save jobs, but cannot prevent a deep recession from the short circuit measures.