Phase III is Coming: 3 Key Things Investors Should Expect for 2021 FREE SPECIAL REPORT

2020-12-15     thesmartinvestor
Phase III is Coming: 3 Key Things Investors Should Expect for 2021

The long-awaited news has finally arrived.

On Monday, Prime Minister Lee Hsien Loong said that the country is now ready to enter Phase III.

The next stage of reopening will commence on 28 December.

The announcement was welcome news for Singaporeans, residents and businesses alike.

And there’s even more good news.

The Health Sciences Authority of Singapore has also approved the use of the Pfizer-BioNTech COVID-19 vaccine, with the first shipment expected to arrive before the end of this year.

To encourage participation, PM Lee said that the vaccine shots will be free for all Singaporeans and long term residents.

If everything goes according to plan, there will be enough vaccine shots for the entire Singapore population by the third quarter of 2021.

With the start of Phase III and the arrival of the vaccine imminent, we can finally say that there is a clear line of sight to the end of the COVID-19 safety measures.

Here’s what investors can expect:

1. Higher capacity limits for malls

As part of Phase III, several restrictions will be loosened just in time for the festive season.

For instance, capacity limits for shopping malls and tourist attractions will be increased.

With a higher traffic ceiling, retail-based REITs such as Frasers Centrepoint Trust (SGX: J69U), SPH REIT (SGX: SK6U), Leadlease Global Commercial REIT (SGX: JYEU) and Starhill Global REIT (SGX: P40U) can forward to more shopper traffic in the coming year.

That should bode well for tenant sales at shopping malls. And with better sales, tenants will be in a better position to service their rental payments to the REITs.

2. Dining group limits increased

Likewise, restaurants, which have been limited to seating groups of five, can now welcome groups of eight.

The new phase of reopening should be a welcome relief for food and beverage (F&B) companies such as JUMBO Group Ltd (SGX: 42R) and Koufu Group (SGX: VL6) which have seen their revenue take a hit from the COVID-19 safety measures.

For the fiscal year ended 30 September 2020 (FY2020), JUMBO’s revenue fell by more than a third compared to the previous fiscal year.

Similarly, Koufu’s sales for the first half of 2020 came in more than 23% lower compared to a year ago.

In its November update, the company said that the level of business at its food courts, which are located near offices, downtown areas and universities, has improved but remains lacklustre.

With bigger groups now allowed, both companies should see better days next year.

The F&B segment is also a major tenant for shopping malls. As the sector recovers, it could indirectly benefit the retail REITs.

3. Staycation boom

Local attractions can now apply to increase their operating capacity from 50% to a maximum of 65%.

The loosening of restrictions bodes well for tourist attraction operators such as Straco Corporation Ltd (SGX: S85), that runs the Singapore Flyer, and Genting Singapore Ltd (SGX: G13), the owner of Resorts World Sentosa.

There could also be a spillover effect for VivoCity, which is managed by Mapletree Commercial Trust (SGX: N2IU).

The sector also received a boost from the government through the issuance of S$100 worth of SingapoRediscover Vouchers to each Singaporean aged 18 and above.

Get Smart: Light at the end of the tunnel

At long last, we can all see some light at the end of the tunnel.

Phase III is another key step towards a return to normalcy that many have been craving.

At the same time, we may want to temper our expectations and remain vigilant.

The multi-ministry task force reiterated several times on Monday that the war against COVID-19 is far from over.

There will also be a risk of imported cases as Singapore reopens its borders.

And with larger crowds mingling in malls and other venues, the risk of locally-transmitted community cases will also rise.

Phase III is also expected to last for a year or more.

As investors, we may want to take our time to invest, and observe the situation as it develops.

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Disclaimer: Chin Hui Leong owns shares in Frasers Centrepoint Trust.

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