<News Analysis>: Singapore Retail – Minimal earnings impact with 5 pax social viewed as full year status quo

What has happened. 

  • In response to the risk of Omicron variant spread within the community in Singapore, the multi-ministry task force (“MTF”) in the latest press release mentioned that the current COVID-19 rules will remain during the Chinese New Year (“CNY”) period in early Feb’22. This means that the maximum of 5 pax to group sizes for gatherings and dine-in will remain limited to 5 pax ( fully vaccinated, different households allowed). 
  • However, it was noted that there is a possibility of a tightening of measures if COVID-19 transmission is amplified and the healthcare system is overwhelmed. 
  • The Omicron variant has proven to be lesser in impact as opposed to the Delta variant and likely to overtake Delta as the dominant virus strain in the Singapore community. Severity of Omicron has been shown in a 67% to 80% lower risk of hospitalisation, but level of infectivity may still result in a higher absolute number of hospitalisations as opposed to Delta. 

Our thoughts

Minimal impact to stock prices. While the lack of  relaxation maybe seen as a negative in the onset, we believe that investors have not baked in expectations of a further relaxation in share prices yet, given that price performance are still at close to the start of 2021. We have not priced in further optimism into earnings estimates with 5 pax social limit viewed as status quo for the rest of the year. Ahead of gatherings across Chinese New Year, families may choose to increase frequency of dining out given the social limit cap with the probability of larger group gatherings now out of the picture. That being said, channel checks continue to show very strong dining out interest across December, which should extend to Chinese New Year and Valentines Day, while restaurant reservations has been pretty much viewed as the norm now to secure seats. Another round of tightening may lead to us reviewing full year estimates, for now, developments constitutes a ‘buckling of seat belt’ as opposed to a deceleration in recovery.