With the rise of the Omicron variant, we are seeing some stocks in SGX gain momentum even when the overall market tanks. For those unfamiliar with the scene, our exchange saw immense volume and traction with its medical stocks during the lockdown period last year. Some may even speculate that there may be some form of similarity between the state of Covid and the price of such counters.
As an avid observer, I can’t help but notice that there is a mini short squeeze going on in SGX at the moment and while the initial squeeze has passed, we are now at an extremely crucial point where the trade can go either way.
Will this momentum continue? I’m not too sure myself but here are 5 stocks that should be on your watchlist if you’re feeling gutsy!
1) Medtecs International (SGX:546)
Medtecs was the gem of SGX last year where it rose by almost 10x from $0.2 in January 2021 to a high of $1.80 by August 2021. The momentum for this company back then was insane and one can only speculate the reasons why. Although, I must note that the lockdown definitely helped to spur on the bull market as people were more bored at home.
Medtecs is the “world’s leading supplier and distributor of personal protective equipment (“PPE”) and provider of logistics services to healthcare institutions.” Depending on which side of the fence you are on, some may say that they are profiteering from the pandemic and other might say that they are “saving the world”.
However, if we look at things objectively, the stock price of Medtecs does indeed move up and down depending on the state of Covid-19 in the world. So, can the momentum last?
Based on their latest financial reports, revenue surged by almost 5x in 2020 given the increase in PPE demand. As such, the rally in 2020 comes as no surprise.
In the past 6 months, the trend show that this stock was indeed being heavily shorted by the market right up to the point where Omicron was announced. Since then, the stock has seen an almost 50% increase in the past 3 days!
At the time of writing, we are seeing prices rejecting the $0.50 psychological resistance level for Medtecs. Should price action break past this resistance level, then I’ll be ready to board that rocketship to the moon. Disclaimer: I myself made an entry into Medtecs following the spike on the first day.
2) Top Glove (SGX:BVA)
Top Glove is one of the world’s largest producers of medical disposables notably its gloves. With disposable gloves there are all sorts such as nitrile vs latex but to keep things simple, we will refer to gloves as the industry as a whole.
The market cap of Top Glove sits at approx. S$7.5b, making them the largest glove makers as compared to other players in the industry such as Riverstone at S$1b and UG Healthcare at $240m.
Top Glove has been in the spotlight for quite sometime for both good and bad reasons. While the run-up wasn’t as much as Medtecs, we are still looking at about a 4 to 5x return within the same time period.
One of the most dramatic events to happen to this company was its import ban in US over alleged abuse of its migrant workers. The first few reports which emerged did catch my attention but after all these back and forth, I’m honestly more annoyed than anything else.
More than just a hype-play, Top Glove has indeed reported fantastic FY 2021 profits given that the pandemic has indeed increased the demand and price of their products.
MALAYSIAN glove maker Top Glove reported a surge of 352 percent for its FY2021 profit to RM7.7 billion (S$2.3 billion) from RM1.8 billion a year ago in a regulatory filing on Thursday (Oct 28) during the midday break.
At present, with its market value cut by more than half, this company is indeed on the watchlist of many. For those seeking an entry on a longer-term horizon, do consider carefully.
Here’s are commentary from Bloomberg:
“At one point last year, more than $1 of every $10 invested in the Malaysian stock market was a bet on gloves — a feat that makes the Southeast Asian nation a play on global hygiene, much like South Korea and Taiwan are for semiconductors.”
“Demand growth and pricing won’t go back to 2020 levels but there will be some improvement especially if virus cases rise,” said Danny Wong, chief executive officer of Areca Capital Sdn.”
3) Riverstone (SGX:AP4)
Trading at a reasonable Price to Earnings of just 1.96, Riverstone also operates in the same medical glove industry as Top Glove. Holding just a fraction of Top Glove’s market cap, the market cap of Riverstone sits at approx. S$1b.
Similar to Top Glove, Riverstone had a fantastic 2021 with a “49 per cent rise in net profit for Q3FY21“.
In my opinion, smaller companies such as Riverstone have the flexibility to pivot fast than larger companies like Top Glove. In this case, in their 3Q2021 does give a glimpse as to how they are diversifying away from Gloves used in a medical capacity to gloves being used in semiconductor production as well as food and beverage.
4) Q&M Dental (SGX:QC7)
If you’re not familiar with Q&M, you’re probably wondering why a dental company has anything to do with Covid. Unknown to many, Q&M saw its net profit surge due to their contributions in the nationwide Covid-19 testing effort.
Lifted directly from their 3Q2021 Results,
Even without their contributions to Covid-19 efforts, I consider Q&M an extremely defensive stock due to the nature of the business activity. If you’re looking for a company whose revenue would be consistent even if we went back into Heightened alert, then Q&M should definitely be a company that is on your watchlist. Some additional commentary from Business Times,
- As at Sep 30, Q & M’s number of dental clinics in Singapore has grown to 90, from 81 as at Sep 30, 2020
- Similarly, in Malaysia, the number of dental clinics has increased to 38, compared to 33 previously.
- To support this growth, the group has also increased its total number of dentists to 270 as at Sep 30, 2021, compared to 250 previously.
- In Q3FY21, the company opened three new clinics in Singapore, in Canberra Street, Bedok Reservoir and IMM shopping mall.
5) Biolidics Limited (SGX:8YY)
I’ve always found Biolidics to be a pretty strange company as until today, I can’t really define what they actually do apart from how they are operating within the biochemistry sector. Despite what I think, there is no denying that there is strength in this stock given the frequency of spikes that its share price experiences almost every other month..
On the product front, “The Group aims to differentiate itself with its own neutralising antibody COVID-19 test kit that is embedded with a technology licensed from A*STAR”.
In essence, they manufacture ART test kits very much like the ones we buy off the shelf:
We don’t see their kits too much here in Singapore so I suspect they only sell B2B and not direct to consumers. Even so in this day and age, with so many manufacturers in this crowded ART space (business is business), Biolidics have declared that there was a “significant drop in the sale of the Group’s COVID-19 related products due to a highly competitive market with a growing supply of antigen and antibody test kits”.
Fundamentals and technicals aside, the share price seems to be reactive to any sort of breakthrough or news relating to the company’s activities and the state of Covid-19 in Singapore.
Check out the chart below where I’ve highlighted the various times where the price action of Biolidics experienced a massive spike. We’re looking at one happening almost once every 2 months.
There just doesn’t seem to be any consistent pattern here so maybe there is more happening here than meets the eye.
Are you riding on any of these stocks?
I’ve share 5 glove stocks listed in Singapore which could be worth watching if Omicron worsens. Are you looking out for glove stocks this round?