Working from home is one of the themes of 2020 as Covid-19 dawn upon us.
Although the situation is getting better and we see more people going back to the office (SBS Transit’s rail ridership in Sep ’20 is at 59% that of Sep ’19), part of the population are still working from home (like myself).
I would even say that it is possible for some companies to adopt a hybrid model – in office for meetings and discussion while working from home in other times.
Hence, WFH is not going away soon, instead it’s probably a new normal we have to accept and get used to.
There’s even a Work From Home ETF (I’m not making this up!) with the ticker WFH launched in the U.S. to reflect this new normal.
It is not surprising that most WFH enablers are U.S. tech companies like Google and Microsoft. But I wanted to see if there are Singapore listed companies that could benefit from the WFH trend. Here are 10 of them that qualify, in my opinion.
Kimly (SGX:1D0)
Coffeeshops and food courts are staples. We need to have our meals a few times a day and most young families no longer cook on a regular basis. Hence, there’s a good level of reliance on affordable food venues.
In Singapore, it is not difficult to find an eatery located nearby nowadays. More often than not, you would end up patronizing the closest one to you simply because it is convenient – get your lunch done and hunger fixed so that you can get back to work quickly.
UOB Kay Hian published a report on 12 Oct 2020 and opined that Kimly is the largest beneficiary of the current situation,
Kimly operates more than 65 coffee shops islandwide, making it the largest coffee shop operator in Singapore. Competitors Kopitiam operates around only 30 coffee shops, while Koufu operates 16 coffee shops. The advantages of coffee shop operations [are that] their locations in the heartlands where many are working from home, easy access to online food delivery providers and lower price points due to lower operating costs as compared to operating in shopping malls.
Neo Group (SGX:5UJ)
You might be wondering how the largest catering company in Singapore (20% market share) can be benefiting from WFH, considering that large events aren’t allowed at the moment.
I included it because Neo Group was able to adapt to the situation as they ramped up their tingkat delivery meal service during the Circuit Breaker period.
There are some consumers who are lazy to even think about what to eat nor make the effort to travel out to buy food. Such tingkat service is a godsend to them.
The Edge Singapore (5 Oct 2020) had a recent feature on Neo Group,
He [Neo Kah Kiat, founder of Neo Group] adds the group saw a three-fold increase in orders to “nearly 10,000 orders” per day during Singapore’s “circuit breaker” period. Although some restaurants offered delivery services during the lockdown, Neo says, “You can’t be eating restaurant food everyday. It’s too rich. Also, tingkat meals are more affordable at about $6 per meal per person, which is the equivalent of a delivery fee for some restaurants.”
I expect the tingkat meals to continue its good performance as some remain in WFH mode in the foreseeable future.
But I don’t think the tingkat business can replace the loss income in catering. The encouraging sign is that Neo is also looking at catering food to childcare and eldercare establishments which continue to operate during the Circuit Breaker period and beyond.
Sheng Siong (SGX:OV8)
Sheng Siong made record revenue during the Circuit Breaker as locals rushed to buy all they could, in case the supplies run out.
Its 1H2020 revenue jumped 53% year-on-year to $747m while the net profit doubled to $75m. This huge growth is probably not repeatable and unique to Covid-19 (unless there’s another catastrophe).
Even as the situation has normalized, supermarkets can benefit from the WFH arrangement. Think about it, you would need more toilet paper, hand wash, tissue, frozen foods, biscuits, snacks, fruits, drinks and what not, when you spend more time at home. You have to build your own pantry when you can’t access the one in office. Everyone needs his comfort food to be happier and to reduce stress. Sheng Siong is the supplier of happiness.
Sheng Siong has always been adding more outlets. In fact, at the point of writing, they have two more in the pipeline:
- 3Q2020 Potong Pasir Ave 2 +4,600 square feet
- 3Q2020 Blk 872C Tampines Street 86 +5,300 square feet
Instead of relying on ecommerce or moving your butt to the supermarket, the strategy has been about bringing the supermarket closer and closer to you.
QAF (SGX:Q01)
Bread is another staple item I can think of when it comes to WFH. There’s always a fear that one would go hungry and bread is always a convenient and quick way to quash that hunger. Also, not having to travel to work means there’s more time for breakfast and bread is what naturally comes to mind for most people.
Gardenia is one of the most popular brands in Singapore. Its 1H2020 performance has shown that revenue correlates with the number of people staying at home – revenue jumped 10% to $463m and net profits skyrocketed by 1,000% to $29m.
Given that Singapore’s GDP is still down 7% for the year, bread may be an economical way to fill the stomach.
ThaiBev (SGX:Y92)
No, I’m not asking you to drink Chang beer in celebration (or to drown your sorrows). ThaiBev acquired F&N in 2012 and now they own many of the FMCG beverage products – Magnolia milk, Farmhouse milk, Nutrisoy, Fruit Tree juices, Nutriwell, 100Plus, Seasons Lemon Tea and more.
Prior to WFH, most are too busy to enjoy such beverages at home. On top of that, these items have a relatively short shelf life; it would be wasteful to buy and not consume all of it before it expires. With WFH, some would find more utility in getting these drinks as they get to consume them more frequently.
ThaiBev’s 9 months results as of 30 Jun 2020 showed that only the non-alcoholic beverage segment enjoyed revenue and EBITDA gains while other segments (spirits, beer and food) registered revenue declines.
Hanwell (SGX:DM0)
Hanwell is probably the lesser known stock in this WFH list. But it has an important role as a FMCG distributor and you probably have bought their products before – Royal Umbrella and Golden Peony rice, Golden Circle cooking oil, Fortune tofu, Mama Lemon, Shokobutsu, Kodomo, Beautex Tissue and many more.
These items were selling like hot cakes during the Circuit Breaker and contributed favorably to Hanwell’s financial performance in 1H2020. Thanks to these products which helped to offset the drop in Hanwell’s subsidiary Tat Seng Packaging’s revenue. The net profit jumped 134% to $13m for the first 6 months of 2020.
Hanwell’s founder, Dr Allan Yap, declared bankruptcy in Hong Kong. He was late to resign from the board of Hanwell (because a bankrupt cannot be a board member) which made the news in Singapore. Despite that, Hanwell share price went up because Dr Allan Yap’s spouse, Dr Tang, bought more shares in the company. Don’t ask me where she got the money.
Frasers Centrepoint Trust (SGX:J69U)
I mentioned about this REIT on several occasions and avid readers of our blog should know it well. Frasers Centrepoint Trust owns many suburban malls in Singapore. Unlike the malls in the city, suburban malls do not suffer from a WFH situation or a tourism drought.
In fact, suburban malls stand to benefit as people would visit malls closer to their homes if they need to run errands or take a walk or enjoy a nice meal at a restaurant. How many times have you heard others lament that “nowadays, every mall in Singapore looks identical”? In my opinion, there’s no real need to travel to a city mall to get what you want.
Frasers Centrepoint Trust just ended its private placement and rights issue to acquire more suburban malls. This move would bolster its portfolio of malls and fuels its growth further.
SingPost (SGX:S08)
SingPost hasn’t been delivering good news in the press – if you remembered there was a period where mails were not delivered. The service was so bad that IMDA had to impose a $300k fine on SingPost. But I think the reputation cost much more than the monetary fine.
So why is SingPost in this list?
The truth is that the company is still playing an important role in society – they delivered important documents and letters. It is a function that email has not been able to replace. In addition, SingPost also provides courier services and WFH means that we need these services more – you may need to sign documents but are not meeting in person (not all companies accept digital signatures) and buying things online require deliveries.
Hence, SingPost can stand to benefit from WFH, if they tighten up their operations and get their act together.
Keppel DC (SGX:AJBU) and Mapletree Industrial Trust (ME8U)
Data centres! Increasingly, companies are going to digitize more of their business processes to reap the advantages that technology offers and also to enable a remote working environment. The data needs will increase and more spaces would have to be created to house the servers.
In the digital world, it is more lucrative to be a landlord for servers than a landlord for office workers. The former would see growth while the latter has to fight the WFH trend.
Is the WFH trend here to stay?
Same same, but different.
Post-Covid 19, I believe majority of the people return to work in office but at the same time, WFH is going to be more widely adopted than before.
I have identified 10 local stocks that could possibly benefit from the WFH trend.
That said, there could be other trends or situations that could neutralize the WFH effects for some of these companies. Hence, it is important to analyze the businesses in entirety before investing.
Good luck!
(This article was 100% produced at home.)