On 14 May 2021 (Friday), the Singapore government announced further tightening measures as COVID-19 community cases in Singapore continue rising over the past few weeks. From 16 May 2021 to 13 June 2021, Singapore will go into Phase 2 (Heightened Alert).
As written in a DollarsAndSense Business article, these measures take us into a quasi-Phase 1 environment. Similar to Circuit Breaker and Phase 1, dining out will not be allowed, visiting of homes are capped at just two visitors per day while workers are, by default, supposed to work-from-home even though offices are technically still open.
Not surprisingly, the financial market in Singapore took a beating due to the announcement. The benchmark Straits Times Index (STI) dropped by about 2.1% on 14 May 2021.
As some of us may have known from last year’s circuit breaker experience, tightening measures tend to put companies in distinct winner and loser brackets. While many companies will decline in their stock price, others may actually fare better because of Phase 2 (Heightened Alert).
Sheng Siong (SGX: OV8) – up 10.6% on Friday
Sheng Siong (SGX: OV8) share price has been on a tear since the circuit breaker period last year. After dipping to a low of $1.08 in March 2020, the company exited the circuit breaker with its share price at $1.57. This was the level that it continued trading at for the rest of 2020. On 12 May 2021, its share price was at $1.50. After the announcement of the tightening measures, it increases to $1.66.
The increase in share price is easy to understand. With dine-in no longer allowed and people encouraged to stay at home, Singapore households will naturally buy more groceries as they cook more at home. The uncertainty of what may happen next may also cause families to stock up on groceries more than they normally would.
Sheng Siong performance isn’t merely speculative based on the long queues that some of us may have seen on social media. These queues do lead to an increase in the company’s revenue and profits. In its 2020 Annual Report, the group announced that on the back of elevated demand, its revenue for 2020 increased by 40.6% to $1.39 billion, which is the first time the group revenue crossed the $1 billion mark. In line with the growth in its revenue, both its net profit margin (27.4% in FY2020 compared to 26.9% in FY2019) and net profit also increased, with its net profit up 83.7% to $139.1 million.
As a household name in Singapore that is in a traditional business dealing with daily essentials, it’s clear that Sheng Siong is a company that is vital for Singapore, regardless of whether or not the COVID-19 pandemic situation in Singapore improves or worsen.
UG Healthcare (SGX: 8K7) – up 5.9% on Friday
UG Healthcare (SGX: 8K7) is predominantly a rubber glove manufacturer that is based in Malaysia. As global demand for gloves continues to be at a supernormal level because of the pandemic, it’s not difficult to see why UG Healthcare will continue to do well.
At the start of 2020, UG Healthcare was trading at about $0.05. It ended the year at about 12 times higher at $0.59. On 14 May 2021, its share price went up by $0.04 (about 6%) to $0.71.
Investors have reasons to be optimistic. In a voluntary business update on 10 May 2021, the company shared that it has achieved four consecutive quarters of earnings growth. For example, its revenue for 3Q FY2021 (from 1 Jan 2021 to 31 March 2021) is $93.4 million, or about 2.4 times higher than the same period last year (1 Jan 2020 to 31 March 2020). More importantly, net margin for the company has increased significantly, from 1.6% in 3Q FY2020 to 36.7% in 3Q FY2021. For the 9M FY201, net profit attributable to owners of the company is $89 million. The company is currently trading at a P/E of about 6.3.
Despite the introduction of vaccination, the number of COVID-19 cases around the world continues to remain at a high level. This means demand for rubber gloves should continue to stay high, at least until we can envision a world where we can live freely without the fear of COVID-19 or another pandemic.
Read Also: How Do You Start Investing In Rubber?
SIA (SGX: C6L) – down 5.6% on Friday
Despite the best effort of ministers like Ong Ye Kung, Singapore Airlines (SIA) (SGX: C6L) to open up Singapore’s borders, SIA simply cannot catch a break. The 1-year price chart of Singapore’s national carrier pretty much tells you everything you need to know about the company.
In May 2020, SIA was in the doldrums with global travel reaching a non-existent level. A fundraising exercise was required to ensure that Singapore’s national carrier could survive the pandemic. For the rest of the year, SIA traded sideways at the $3 to $4 level.
After Phase 3 was announced in December 2020 along with the approval of vaccines, the share price for the airline started showing some signs of recovery as the hope was that travel could reopen in Singapore sooner rather than later.
However, after reaching a high of $5.72 in April 2021, it has since fallen. On 14 May 2021, prices went down 5.6% and the stock is now trading at $4.50. This is at a price level that is just slightly higher than what it was in December 2020 after the country went into Phase 3 and approval for vaccination was announced.
In a strangely ironic way, SIA share price performance can be seen as a proxy to how well (or how badly) the COVID-19 pandemic situation in Singapore is.
CapitaLand Integrated Commercial Trust (SGX: C38U) – down 3.86% on Friday
As shown on its website, CapitaLand Integrated Commercial Trust (SGX: C38U) prides itself on being the largest proxy for Singapore’s commercial real estate trust. Retail malls that it owns and manages include Bedok Mall, Bugis Junction, IMM Building, JCube, Junction 8 and Tampines Mall. Offices include Asia Square Tower 2, Capital Tower and 21 Collyer Quay, among others. The company also owns integrated developments like Funan and Raffles City in Singapore.
Similar to most other commercial REITs, Phase 2 (Heightened Alert) will pose a challenge to the company’s short-term earnings. One would naturally expect lower footfall, retail spend and office rentals in the months ahead as businesses struggle to cope with the uncertainty posed by COVID-19.
To no real surprise, CapitaLand Integrated Commercial Trust saw its share price dropping by $0.08 to $1.99 on 14 May 2021 after the announcement of further tightening measures.
In its FY2020 results, the company understandably saw a decline in its revenue ($745 million in 2020 compared to $786 million in 2019) and its distribution per unit (8.69 in 2020 as compared to 11.97 in 2019).
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