Brokers' take: Upside for aviation, consumer and manufacturing stocks from Budget 2021

DBS Group Research said it sees Tuesday's Budget 2021 announcement as "more shots in the arm" for several sectors receiving targeted support.

Retail Reits as well as aviation and supermarket stocks are particularly likely to benefit from certain measures this year, said DBS in a research report on Wednesday.

With low-value goods imported via air or post to be taxed for goods and services tax (GST) from 2023, DBS thinks retail Singapore Reits (S-Reits) stand to benefit in the medium term from a more level playing field between brick-and-mortar retailers and their online competitors.

S-Reits which are able to benefit from the variable rent component of their lease structures could receive an added boost from consumers front-loading purchases prior to the GST hike, it added.

Top "buy" picks by DBS comprise Frasers Centrepoint Trust, CapitaLand Integrated Commercial Trust and Lendlease Global Commercial Reit, which have been given the respective price targets of S$3.00, S$2.50 and S$0.90.

Within the aviation and tourism space, DBS believes Singapore Airlines (SIA), SIA Engineering and ST Engineering will benefit from cost savings, thanks to an extended Jobs Support Scheme (JSS) for the sectors until September 2021.

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In addition to the S$870 million set aside for aviation support, DBS said these measures should help Singapore's aviation and tourism sectors weather the financial fallout from Covid-19 and perhaps emerge stronger than regional and global peers.

The research house has "buy" calls on SATS and ST Engineering for their more diversified businesses, with target prices of S$4.50 and S$4.20 respectively.

Grocery retailers may also benefit from an improvement in consumption resulting from the government's S$900 million Household Support Package, it added. Sheng Siong and Dairy Farm have been rated "buy" by DBS with the respective price targets of S$1.90 and US$4.44.

In a separate report on Tuesday, RHB Research said it views the latest Budget announcement as "mildly positive" for the banking, consumer, manufacturing and land transport sectors.

While the research house thinks budget measures to help workers and businesses should support banks' expectations of downward revisions in credit cost guidance, it maintains its sector rating at "neutral" with DBS as its top pick. It rates DBS a "buy" with a S$30 price target, and remains "neutral" on both OCBC and UOB with the respective target prices of S$9.50 and S$21.

With Budget 2021's focus on improving domestic consumption within the region, Thai Beverage, Sheng Siong and Dairy Farm remain the research house's top "buy" picks at target prices of S$0.94, S$1.87 and US$4.47 respectively.

RHB is also expecting Venture Corp and Frencken - both rated "buy" with S$22.60 and S$1.37 price targets respectively - to gain from the government's plans to grow the manufacturing sector by 50 per cent over the next decade. Both are believed to be able to mitigate the near-term impact of tighter foreign worker quota with increased production at their overseas production bases as they continue to train and hire locals in Singapore.

Meanwhile, CGS-CIMB appears the least sanguine of the three research houses as it perceives Budget 2021 as a "non-event compared to the generous packages in 2020".

While it acknowledged aviation stocks such as SIA and SATS would receive incremental relief from the extended JSS, it said this impact is limited to 2-4 per cent of FY2022 estimates for the aviation stocks under its coverage.

"We believe the tapered wage support of 10 per cent in July-September 2021 could mean partial travel border reopening at Changi Airport. Other sectors such as marine and supermarkets will not see the JSS extended beyond December 20/March 2021," noted its analyst Lim Siew Khee in a Wednesday report.

Nonetheless, she thinks HRnetGroup could benefit from the increased Jobs Growth Incentive as the government has set aside the budget to support the hiring of 200,000 workers through the Jobs Growth Incentive in 2021.

"If HRnetGroup could capture 5 per cent of this market, this could see our initial projections of core PATMI in FY2021 increase from S$45.8 million to S$55.3 million, or a 23.2 per cent growth from pre-Covid-19 levels (from our previous 2 per cent growth estimate), assuming all other variables stay constant," said Ms Lim.

The recruitment firm is rated "add" with a target price of 63.5 Singapore cents.