(Tradeview 2020) - Weekend Time Q&A (11th July)

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Publish date: Sat, 11 Jul 2020, 02:18 PM

Dear fellow readers,

As our telegram Public Channel followers have finally broken 3000, my gesture of thanks for all the support these years has led me initiate a new weekly segment of "Tradeview Weekend Time".

This is not about what I do during my weekend but rather I shortlist 3-5 questions from public during the week about the share market / economy that either emailed me, left a comment or private message me and share my answer or feedback to the public.

I think it is only fair that communication be two ways where readers who enjoy my writing have the opportunity to question, debate, criticise or exchange views. As such, I encourage all of my readers who are keen to ask a question to do so. Whatever the question it may be, I am sure it will benefit others as well in this learning process.

Without further ado, let me kick off my second weekly segment with the following 3 Questions :

Q1. Hi Tradeview,

In your own take, do you think Medtecs is still worth getting into? It's like all the gloves stocks, it has run up a lot but then again we're in this crazy pandemic that possibly the demand for these items are so huge beyond our imagination.

They however did not gave any indication as of yet about their ability to meet the production demands.

Thanks
Calvin

Ans :

This is a very interesting stock. I think whoever that owns this from the start of Covid-19 holding on till today would probably be earning at least 6 figures. The share price has went up close to 1740% from SGD 5 sens to 87 sens. The meteoric rise is no different from the big 4 glove players or Riverstone & UG Healthcare listed in Singapore. This is not a glove player but a regional player in PPE which includes their own distribution channel and brand in various markets such as Taiwan, Philippines, Cambodia, Singapore and China. The management in the last results earnings has indicated they will double their capacity to meet raging demands. Their earnings went up close to 1500% as well. So what I am saying is share price always move in tandem with earnings. If earnings growth is there, the share price will move. So the next earnings report would be crucial as it will show whether they are able to sustain their earnings as not a one off. With global shortage still at bay, I am of the view there is still more upside TP the share price but the risk to reward ratio is lower compared to earlier. In a way, it is a known fact that these PPE & glove players are beneficiaries of the pandemic.

One thing though I like about Medtecs is the arbitrage play as the company is dual listed in Taiwan. Medtecs Taiwan share price has limit up almost every day for the past 2 weeks. It is not trading at $23.40 TWD which is equivalent to $1.10 SGD. At current price of 87 sens, it is definitely still a gap / premium difference between Taiwan and Singapore.

Q2. Hello there, I got a big amount in Comfort & Ruberrex & Careplus. Everyone talking bout Big 4 only. Will my stocks still go up?

Tay

Ans :

Investing in glove is definitely the right thing to do for 2020. If you are asking me this question, I believe you must have invested earlier as well and sitting on some good profits. However, you must be wondering why is the Big 4 flying up daily but not your smaller cap glove stocks.

If you look at my earlier articles, I have never once recommended smaller glove players which has no economies of scale or leverage in negotiating bargaining price with customers. The big 4 enjoys economies of scale and bargaining power due to the market share they control. Additionally, if you are a smaller player, you are always at the mercy of your big clients who will dictate their terms. Having said this, I think Comfort results has shown that they delivered their earnings to justify their share valuation. In fact, it has went up since the time they announced their results. Similarly for Rubberex, although I don't like their balance sheet due to low cash position and higher debt. Careplus on the other hand is a no-no, purely being played into the theme. The only good thing is they have strong shareholder - Ansell. I have written extensively on this, you can refer to my earliest writings on the sector here : http://www.tradeview.my/2020/06/tradeview-2020-commentaries-on-recent.html

Q3. Sir, r u in tech stocks? Tech stocks seems to be all the hype now.. I m not sure shud I sell / add more. I think new norm tech stocks will do well.

Saravanan

Ans :

Technology sector is very wide. I am not sure which stock or sub-sector you are referring to. However, I think when it comes to investing. It all comes back down to basics of fundamentals. Buying into the hype is the wrong approach. Nasdaq is going all time high resulting a positive sentiment for the sector. For Malaysian, the really good "technology companies" are actually manufacturers or testers of semiconductors components like Pentamaster, UWC, Greatec, Frontken amongst others. Others in the EMS sectors are like Ataims, SKPres, VS Industry etc. Sadly, Malaysia do not have a true technology company like in Silicon Valley or global players from China. We also lost Grab to Singapore government as Khazanah chose to back Uber instead of homegrown company.

Hence, if you were to invest in this sector you must choose wisely to understand what companies you are investing. Overall, we think the sector is over-heated and definitely overvalued. The positive is quite a number of these companies are net cash with minimal debts. Also, should the economy picks up, there are recovery play. My conclusion - invest wisely, look at earnings, if there is no earnings visibility in coming months, do not blindly chase because the table next to you in a restaurant is also buying the same stock.

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