Defence, healthcare, bank stocks likely winners from Budget 2019

Defence, healthcare, bank and grocery stocks are the possible winners from Monday's Budget, analysts said yesterday.

Its emphasis on defence and building a Smart Nation sent defence contractor Singapore Technologies (ST) Engineering to the top of the winners' list for many analysts, with DBS, RHB and CGS-CIMB highlighting the stock.

RHB, which has a "buy" call on the firm, noted: "We view the Government's increased focus on defence spending as positive for ST Engineering, which remains a key innovator and supplier of defence equipment to the country."

Investors were not so sure, sending ST Engineering stock down 0.27 per cent to $3.73 yesterday.

The Budget changes to foreign-worker policy are expected to affect several industries.

CGS-CIMB said the impact of tighter restrictions is "slightly negative", but will be alleviated in part by measures meant to help cushion the blow, such as an extension of an automation support grant.

RHB said the cut in the proportion of a company's staff that can be foreigners will be "near-term negative" for food and beverage (F&B) players and preferred grocers.

DBS reckoned the quota reduction is marginal for bigger F&B companies such as Jumbo, Koufu, BreadTalk, Sheng Siong and Dairy Farm because they have large employee counts, and that longer-term productivity could improve with government support.

 
 
 
 
 

Jumbo closed unchanged at 41 cents and Koufu rose 0.8 per cent to 63.5 cents, while BreadTalk was flat at 88 cents as was Sheng Siong at $1.08 and Dairy Farm at US$8.97.

However, the offshore marine sector could benefit from another year's deferment of foreign worker levy hikes.

"We estimate that the move could save Singapore rig-builders $3 million to $4 million each in 2019 and 2020," DBS noted. "While this may not be a very significant amount, every bit helps, given the competitive operating environment and plunge in profitability."

RHB said banks will also benefit from a continued push for digitisation among small and medium-sized enterprises (SMEs), which could see more banking going online.

This is particularly in the areas of digital payments and cash management, which should benefit banks in respect of lower cost-to-income ratio and ultimately contribute to higher return on equity.

RHB has "buy" calls on DBS and United Overseas Bank.

DBS closed down 0.4 per cent at $25.10, while UOB fell 0.27 per cent to $25.80.

Taxi firm ComfortDelGro Corp is expected to see only a marginal impact from a permanent reduction on the Special Tax on diesel taxis, which was announced to offset an increase in excise duty on the fuel.

The company will probably pass on the savings from the reduction in the Special Tax to drivers, said DBS and CGS-CIMB.

"We could see about $7 million in cost savings for ComfortDelGro, but this is likely to be passed through to drivers in rental rebates (up to $1.70 per day)," CGS-CIMB said. "The positive is the accelerated pace of switching from diesel to hybrid taxi models."

ComfortDelGro closed up 0.83 per cent to$2.43.

 
A version of this article appeared in the print edition of The Straits Times on February 20, 2019, with the headline 'Defence, healthcare, bank stocks likely winners from Budget 2019'. Print Edition | Subscribe