It’s not gloom and doom for all companies during Covid-19. There are always winners in a crisis.
It’s the 1H2020 results season, I’ll highlight a handful of noteworthy companies that managed to turn this crisis into an opportunity.
#1 – Medtecs (SGX:546)
Net Profits Jumped 9,976%
Medtecs manufactures hospital textiles and personal protective equipment that were greatly needed during Covid-19.
What amazed me was Medtecs’s ability to rapidly increase its supply and capitalise on the increased demand! We all know that production takes time, ramping it up requires more facilities and new facilities don’t just appear from thin air.
Medtecs has shown great execution and they are now reaping the rewards. Its revenue and net profits increased by 391% and 9,976% respectively!
I checked their inventories level at the end of 31 Dec 2019 and found that it maintained at the about the same amount of $38m as with 30 Jun 2020.
This means that Medtecs was did indeed increase their production instead of selling off their excess inventories. Again, commendable execution.
Trade receivables (i.e. sales made but cash not collected) have ballooned almost 3 times. This would eventually increase Medtecs cash pile which has already risen to $21m from a mere $3m from 6 months ago.
The balance sheet has strengthened so much in such a short time. The management has also decided to distribute a dividend per share of US$ 0.0085 (or about US$4.7m in total). There were no dividends declared for the same period last year.
Of course, the market has recognised the improvement in business and has bid the share price up by 3,800% or 38x since the start of the year!
Medtecs’s management was even more optimistic about the second half of 2020; as quoted from the latest 1H2020 report,
Looking ahead to the second half of the year, due to long-term supply contracts and a steady stream of new orders, barring unforeseen circumstances, the Group’s revenue and profit is expected to exceed that of the first half of the year.
Management of Medtecs
Medtecs has already increased their production capability by spending US$4.1m to purchase additional plant machineries and new equipment in the Philippines and in Cambodia during this period. That’s almost a 10-fold increase in capital expenditure, considering that only US$0.4m was spent in 1H19.
Medtecs has also expanded their services to include direct sales of the CoverU brand to consumers via e-commerce channels and have been successful with the American and European markets.
#2 – UG Healthcare (SGX:41A)
Net Profits Jumped 1,187%
UG Healthcare is one of the glove makers listed on SGX. They have been the best performers in the local stock market as the world stepped up their demand for rubber gloves.
Their results covering the period of Covid-19 have been released – revenue and net profits have risen by 81% and 1,187% respectively!
UG Healthcare is utilising almost all its production capability, producing 2.9 billion pieces per annum. The capacity is expected to increased by 500 million pieces by Mar 2021 and another 1.2 billion pieces by 30 Jun 2021.
The share price has gained 2,036% or 20x in 2020. Investors have definitely priced in their expectations of UG Healthcare’s solid performance.
The management has decided to increase the dividend per share to $0.00714, which is 176% higher than the $0.00259 dividend paid last year.
#3 – PropNex (SGX:OYY)
Net Profits Jumped 151%
PropNex is a real estate agency in Singapore.
I bet most of us do not expect that people are in the mood to buy properties during a pandemic.
But it seems they were.
I suspect it could be due to two reasons –
- The already low interest rate has just gone lower as the Fed flooded the market with liquidity,
- as people are spending more time at home (even for work), they start to yearn for a better environment to eat, work, live, play and sleep.
Whatever it is, PropNex’s revenue and profits rose 45% and 151% respectively.
PropNex’s share price jumped on exceptional results. It gained 11% since the start of the year.
#4 – Union Gas (SGX:1F2)
Net Profits Jumped 77%
Union Gas is that good old gas cylinder supplier whom you call when you run out of cooking gas.
It’s within expectation for frequency of home cooking to increase significantly during the Circuit Breaker period, since everyone is advised to stay at home.
Union Gas’s 1H2020 revenue grew 27% while profits increased by 77%, compared to the same half in 2019.
It is also interesting to note that Union Gas has 3 business segments.
- Retail LPG. Increased by S$12.94 million or 61.6% from S$21.02 million in HY2019 to S$33.96 million in HY2020. This was the main revenue growth driver during Covid-19. Includes both domestic household and commercial supply to eating houses, coffee shops and commercial central kitchens.
- Diesel. Decreased by S$3.21 million or 26.9% from S$11.92 million in HY2019 to S$8.71 million in HY2020. of circuit breaker measures. Travel and transportation reduced.
- CNG. Decreased by approximately S$0.50 million or 49.0% from
- S$1.02 million in HY2019 to S$0.52 million in HY2020. Mainly for taxis which had little business during Circuit Breaker.
It is important to note that the increase in revenue and profits was also partly due to the acquisition of the commercial LPG business and the LPG manifold systems and pipings from her parent company, UEC.
Despite that, it is still a credible improvement to the business and the stock market has reflected it as the share price has gained 44% since the start of the year.
Union Gas declared a $0.005 dividend per share, which is 67% higher than the dividend of $0.003 given last year over the same period.
#5 – Wilmar (SGX:F34)
Net Profits Jumped 61%
Wilmar is a Straits Times Index (STI) component and a major palm oil producer and food commodity company.
The Company has 3 main business segments.
Its “Food Products” (such as vegetable oil and flour) and “Feed and Industrial Products” (such as animal feeds and non-edible palm and lauric products) have seen rising profits during Covid-19 period.
We had witnessed the crazy buying and stocking up of staples such as edible oil around the world. Hence, it should not come as a surprise that Wilmar’s business has benefited from this behaviour – a 40% rise in the consumer products segment.
The overall revenue has risen 12% while the net profits have jumped 61%.
This was largely due to the decrease in expenses across the board. Other operating expenses dipped by 39% and sales expenses dropped by 29%.
The management isn’t exuberant, they expect a ‘satisfactory’ performance in the second half of 2020.
Dividends per share of $0.04 has been declared by the management. This is a 30% increment as compared to the $0.03 given last year.
The share price has also done well, gaining 19% year-to-date (13 Aug 2020).
Wilmar is in the midst of spinning off Yihai Kerry Awarana in the Shenzhen Stock Exchange, which I previously mentioned would be a positive event for both companies.
1 takeaway for opportunistic investors
Singapore is expected to experience the worst economic recession since independence. But such big picture reporting often masks the winners during this pandemic.
I have only presented 5 examples here, but there were many more. Some businesses such as Union Gas and PropNex were only obvious to investors after the fact. It is difficult to predict their results beforehand.
Other companies such as Medtecs and UG Healthcare were more obvious plays for the pandemic.
Regardless, the Singapore market still have good performers and there are always bright sparks in any bad situations.
As investors, we just need to dig deeper instead of miring in gloom, or generalising that the Singapore stock market is dead.