Page 9 - Valuation in Abnormally Uncertain Times

GUIDANCE ON DISCOUNT RATES

Cost of equity
To estimate the required return on the public equity market as a whole we consider adjustments to the risk free rate/market
risk premium as a result of the current low interest rate level and the risk premium related to the uncertainties brought about by
COVID-19.

Adjustments to the Risk Free Rate/Market Risk Premium
“Risk Free rates”, i.e. returns on longer term government bonds have seen a significant decline over the past years. The
Singapore 10-year and 20-year government rates have declined to 0.93% and 1.25% respectively in April 2020. We set out
below the historical returns in the 10-year and 20-year rates as well as the moving averages.

Singapore 10 Years Government Bond Rate
5.0%

4.5%
4.0%

3.5%
3.0%
2.5%

2.0%
1.5%

1.0%
0.5%
0.0%

Source: Based on data from the Monetary Authority of Singapore

Singapore 20 Years Government Bond Rate
4.0%

3.5%
3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

Source: Based on data from the Monetary Authority of Singapore

Valuation in Abnormally Uncertain Times 9