In Singapore, the local government has announced a raft of measures to help Singaporeans to cope with the persistent global inflation that’s hitting households everywhere.
Deputy Finance Minister and Minister for Finance, Lawrence Wong, announced a S$1.5 billion Support Package to provide targeted and immediate relief for lower-income households and more vulnerable groups.
This package will also extend more help to local Singapore companies and in aiding to boost workforce transformation.
This builds on the support measures announced in Budget 2022 and April 2022, and the package will be funded from the better-than-expected fiscal outturn in FY2021 without any further withdrawal from past reserves.
Below is the summary of the S$1.5 billion Support Package.
Source: Singapore’s MoF, ProsperUs
So, what are the potential implications for investors? I believe these two Singapore companies will benefit from this latest S$1.5 billion Support Package.
1. Sheng Siong Group
Sheng Siong Group Ltd (SGX: OV8) is one of the largest supermarket chains in Singapore and operates a total of 66 outlets on the island.
With the additional cash given out by the government, I believe that this will benefit Sheng Siong as more people will use that money to shop for necessities and groceries in its outlets.
Sheng Siong’s position as a value-for-money supermarket chain will attract more consumers given the inflationary pressure we’re currently seeing.
As more people opt for more economical options, such as having more home-cooked meals, Sheng Siong will more likely be able to raise prices to pass on the costs while preserving its margins.
In my previous article, I wrote about how Sheng Siong has recorded a new record high for its gross margin.
Year-to-date, Sheng Siong’s share price is up by 10.3% and at its current level, it is trading at a trailing 12-month price-to-earnings (PE) ratio of 17.8 times.
The Group has a forward dividend yield of 3.9%, which helps to provide recurring dividend income for any long-term investor.
With an average 12-month target price of S$1.84, this represents upside potential of 15%.
Source: Yahoo Finance, ProsperUs
2. SIA
Singapore’s national airline’s recovery from the pandemic will be supported by the S$1.5 billion Support Package, which will see 2.5 million Singaporean adults get up to S$500 in December.
The recovery momentum will continue now that Singapore Airlines Ltd (SGX: C6L), or SIA, has returned to the black in its recent financial results.
With the reopening of international borders and the resumption of air travel, SIA has seen a sharp resurgence in the number of passengers it carries.
I believe that the extra cash received in December will encourage Singapore families to make travel plans to other ASEAN countries during the holidays.
Given the strong Singapore Dollar, when compared to the region’s other currencies, the additional cash from the S$1.5 billion Support Package will encourage travel – especially with SIA’s budget airline, Scoot.
The expected increase in the number of travellers will support SIA’s recovery after a two-year hiatus from travel amid the pandemic.
Singapore’s government continues to remain supportive of business
Aside from the two companies, there are others that could also benefit from the support measures announced by the Singapore government.
For example, ComfortDelGro Corporation Ltd (SGX: C52) will also benefit from the cash vouchers given to ride on public transport.
The government’s support measures for businesses and workers will also attract investment.
This could benefit other industries and keep business momentum going despite the near-term challenges.
In the long term, I believe the current pullback in the stock market represents an opportunity for investors to buy into Singapore stocks, which has proven to be a resilient market.
For investors who are looking to ride on the recovery theme in the near term, the S$1.5 billion Support Package could keep the momentum going for both Sheng Siong and SIA.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
