In February, MyEG Services Bhd said it had developed an artificial intelligence-based coronavirus risk-profiling solution for Chinese visitors. This was followed by the company’s involvement in Covid-19 rapid test kits in March.
Cashing in on Covid-19
FROM selling Covid-19 test kits to claims of building hospital beds and personal protective equipment (PPE), a flurry of listed companies seem to be keen on jumping on the bandwagon of the coronavirus pandemic.
Taking advantage of the shortage and growing demand for such products, companies that have never been in the healthcare segment are also getting into that business.
Perhaps some will end up as success stories but this is yet to be seen.
It should also be noted that all manufacturing plants in the country are being hampered by the movement control order, although there are some companies which are getting exceptions from the government to operate.
But when such plants start operating, there is always the risk of a virus breakout, which could end up in operations being halted.
In February, MyEG Services Bhd said it had developed an artificial intelligence-based coronavirus risk-profiling solution for Chinese visitors. This was followed by the company’s involvement in Covid-19 rapid test kits in March.
However, it must be acknowledged that many Covid-19 test kits out there are yet to be approved by the relevant authorities. And you can actually order them from various online platforms, as many are being made in China.
Then, there is the case of LKL International Bhd, a maker of hospital beds which says it has won a contract to supply PPE to Sarawak hospitals.
There are also others such as SCGM Bhd and Notion VTEC Bhd announcing that they are venturing into PPE manufacturing. DRB-HICOM BHD says it will be producing face shields to assist the frontliners in the fight against the Covid-19 pandemic.
These announcements have given a boost to these companies’ share prices at a time when the market is facing slowing economic growth due to the virus outbreak.
Companies getting into the business of making PPEs, face masks and hand sanitizers will fill a gap in supply and will help bolster healthcare efforts in combating the virus outbreak.
Demand for such items is skyrocketing now and many companies are taking advantage to get a slice of the pie. However, it is worth noting that when the pandemic subsides, so will the demand.
KUB at the thresholdFORMER Finance Minister II, Datuk Johari Abdul Ghani, has been nibbling shares of KUB Malaysia Bhd.
It is not hard to fathom why. When share prices are depressed, it is only right for the major shareholders to buy the stock in the market. He bought a 31.99% stake in KUB at 68 sen per share a year ago.
Since April 1, he has been gradually increasing his stake, which now stands of 32.96%, just short of the 33% threshold that would trigger a mandatory general offer.
The next largest shareholder in KUB is Umno-linked Anchorscape Sdn Bhd that has a 20% stake. Apart from KUB, Johari is also a major shareholder in CI Holdings Bhd, which is involved in the production and distribution of food-related products such as edible oil.
Johari is best known for building a beverage business in CI Holdings that was later sold to Japan’s Asahi Holdings Group Ltd for RM820mil in 2011.
Prior to CI Holdings, Johari was a major shareholder in QSR Bhd that controlled KFC Holdings Bhd. He exited QSR just before a major boardroom battle and emerged in CI Holdings with a major stake.
Johari’s penchant for fast-moving consumer goods, particularly businesses with food-related products, is well-known.
However, it does not fit into KUB’s existing business profile where plantations and energy-related activities are the mainstay.
KUB’s plantation business in Sarawak is not doing well and is up for sale, while its liquefied petroleum gas bottle and distribution business carries a thin margin. It has a 30% stake in KUB-Berjaya Environment Sdn Bhd that runs a landfill in Selangor.
KUB has a decent balance sheet with RM113.6mil cash and debts of just above RM100mil, based on its 2018 annual report.
However, it does not have a strong core business. It registered a profit of RM17.3mil in the financial year ended December 2019 only because of the sale of a piece of land in Petaling Jaya for RM25.3mil.
KUB is now hovering at about 30 sen. If Johari crosses the 33% threshold and is forced to make an offer for the rest of the shares, there probably would not be many takers, as the current price already reflects the net asset value of the shares.
Oil is not wellTHE Covid-19 crisis has been compounded by an oil crisis that under any normal situation would classify as a black swan event on its own. With two major producers, Saudi Arabia and Russia, abandoning supply norms agreed under the Opec cartel, there was a free-for-all in terms of both countries pumping as much as possible.
With demand already way more than supply prior to the Covid-19 outbreak, even more crude oil is a recipe for disaster for the market and oil-producing countries.
The market got a whiff of things to come when the United States president tweeted about a possible deal between both Saudi Arabia and Russia, and that sent oil prices rising steeply.
The rally saw crude oil rising roughly about 50%, sending some of the battered oil and gas stocks even higher from their recent lows. One stock on Bursa Malaysia has doubled in price during the past couple of weeks.
But the meeting didn’t meet expectations. The cuts agreed were on the low side of estimates, and oil, already balancing finely on a tightrope, came tumbling down again.
The cuts will not remove the abundant supply from the market. What it will do is slowly add to storage capacities around the world instead of the gush people were seeing before.
But the end product is that the deal does not remove supply to match demand, which has already been hit badly in recent months.
For Malaysia, the reality is that the deal will not help shore up revenue that much. Bank Negara’s new estimate for crude oil prices for the year is a range between US$25 and US$35 a barrel, a much more realistic projection than US$62 before.
It is likely that oil will go through what it did in 2014 when prices came crashing down, and given the changes to life in what is described as the new normal in the next year to 18 months, it is possible that the new normal for crude oil prices is the range the government has realistically priced in.
https://www.klsescreener.com/v2/news/view/663445/short-position-cashing-in-on-covid-19
