This article first appeared in Capital, The Edge Malaysia Weekly on April 20, 2020 - April 26, 2020

AT time of writing, the Covid-19 pandemic had infected more than two million people across the globe, with more than 130,000 deaths reported.

In Malaysia alone, there have been 5,182 cases and 84 deaths.

To contain the spread of the disease, Malaysia has been on a partial lockdown with a Movement Control Order in place since March 18, which is expected to be lifted on April 28.

Economic activities — excluding those deemed essential — have been at a standstill for more than a month.

Gross domestic product growth this year is now expected at -2% to 0.5%, according to a projection by Bank Negara Malaysia, although some economists are of the opinion that the central bank may be too optimistic.

Like other stock markets, panic selling has seen billions in market capitalisation wiped out from Bursa Malaysia as investors digest the unprecedented situation of a supply shock as factories lie idle and demand plunges owing to the restrictive lockdown. Also palpable is the fear of companies pulling down their shutters and the consequent lay-offs.

Yet, as in any crisis, there are those that are in the right place at the right time, as well as those that have risen to the challenge and managed to unlock opportunities.

Covid-19 being principally a health crisis, some existing healthcare players have been quick to ramp up production to meet enhanced demand. Yet others have taken it a step further and diversified their current offerings by using their core competencies and available resources to venture into the healthcare sector — in particular to produce items that are very much in demand.

We take a look at some of these companies here.

SCGM Bhd

Thermoform food packaging manufacturer SCGM Bhd announced last month that it has expanded its product portfolio by developing, producing and supplying medical personnel with personal protective equipment (PPE) — medical face shields and masks to be exact.

The group commenced production of medical face shields in February by repurposing one of its production lines and expects to commence production of face masks later this month.

SCGM managing director Datuk Seri Lee Hock Chai tells The Edge that the group had registered RM2.9 million in sales of face shields as at March 30.

“We have seen considerable demand for medical protective face shields in the healthcare sector ...  Going forward, we believe this product will be one of our main non-food and beverage products, as the product will be an essential [component of] personal protective equipment for the short to medium term.

“[This is] in light of other industries, apart from the healthcare sector, adopting the product in navigating the ‘new normal’ landscape post-MCO,” he says.

SCGM aims to achieve sales of RM3 million to RM4 million a month for both its protective face shields and masks. The group has allocated RM1 million in capital expenditure for the production of both products.

At present, local demand for its protective face shields is robust.

“[We are] primarily supplying protective face shields to clients in Malaysia by leveraging our well-established domestic supply distribution of medical products. Nevertheless, [we are] also seeking to establish new supply networks in other markets and have received orders from Singapore,” Lee says.

For the nine months ended Jan 31, (9MFY2020), SCGM reported a more than five-fold increase in net profit to RM10.4 million compared with the same period last year, largely due to partial utilisation of last year’s capital allowance and reinvestment allowance brought forward.

However, revenue for the period declined 4.8% to RM160.82 million due to lower sales of non-customised food and beverage packaging products and other non-core packaging products.

SCGM shares closed at RM1.25 last Wednesday, valuing the company at RM240.7 million. Compared with a year ago, its share price has appreciated 22%.

In an April 1 note on SCGM, Public Investment Bank says the company is likely to see huge savings on resin costs in the coming months given the current low oil prices, which will further translate into margin expansion for the group.

Public Investment has a “buy” call on SCGM with a target price of RM2.20, indicating an upside of 76% to its current share price.

Notion VTec Bhd

Notion Vtec, a supplier of high quality and precision machined components for the automotive, hard disk drive and electronics manufacturing services (EMS) segments, has decided to venture into the manufacturing of face masks, as well as the production of components for medical ventilators.

Executive chairman Thoo Chow Fah says Notion is expecting to produce 150 million pieces of three-ply surgical face masks per year, with annual sales estimated at more than RM100 million.

“The ventilator components are expected to garner sales of RM10 million to RM15 million over the next two months,” he tells The Edge.

For its first financial quarter ended Dec 31, 2019 (1QFY2020), Notion Vtec made a net profit of RM14.17 million against a net loss of RM2.17 million a year ago, largely owing to a business interruption loss insurance settlement arising from a fire that occurred at its facility in 2017.

Revenue for 1QFY2020 increased 11% to RM70.34 million on higher contribution from its EMS segment.

Notion Vtec closed at 81 sen last Wednesday, which translates into a market capitalisation of RM274.37 million. Compared with a year ago, its share price has appreciated 41%.

LKL International Bhd

Medical and healthcare bed manufacturer LKL International Bhd, which also distributes medical peripherals and accessories, has been kept busy amid the health crisis.

Managing director Lim Kon Lian says LKL has seen a surge in enquiries for its beds, medical peripherals, accessories and medical devices as hospitals look to ramp up their capabilities to cope with the increasing number of infections.

“Our [financial] results were already on an improving trend prior to the Covid-19 outbreak, as reported in our 9MFY2020 [nine months ended Jan 31, 2020] results, as we continued to implement our growth strategies. The recent surge in demand is likely to contribute to double-digit growth in group revenue for the current financial year.

“We have received new orders for around 600 new healthcare beds since the beginning of the Covid-19 outbreak, worth a total of RM2 million,” he says.

LKL announced last month that it will supply RM6.6 million worth of PPE to the Sarawak government for onward distribution to public hospitals.

On whether the PPE business is expected to be a major contributor to revenue, Lim explains that PPE distribution comes under its trading arm and, as at 9MFY2020, accounted for only 30% of group revenue and is not expected to be a major contributor for the current financial year.

“Apart from PPE, we have also seen increasing enquiries for medical peripherals, accessories and medical devices, which are also required for combating the outbreak,” says Lim.

LKL saw a more than four-fold increase in net profit to RM1.17 million in 9MFY2020 compared with a year ago, on the back of an 18% jump in revenue to RM33.5 million. The improvement was mainly attributed to higher sales across product segments and geographical markets.

LKL shares closed at 26 sen last Wednesday — a 117% increase compared with a year ago — valuing the company at RM109.34 million.

K-One Technology Bhd

ACE-Market listed K-One Technology, which is involved in the design and development of Internet of Things products and healthcare devices, announced last Monday that it is expanding its healthcare product portfolio, principally into the manufacturing of ventilators.

“Ventilators are in short supply in many parts of the world for use in hospitals to save lives, particularly Covid-19 patients with chronic respiratory illness. [K-One], with its expertise in design and development and vast experience in manufacturing multifarious devices from various business segments, which includes healthcare devices or equipment, has recently obtained open-source design files of a ventilator model released to interested parties by a multinational in the healthcare industry.

“[We are] studying the ventilator design and intend to build a prototype. We expect to commence manufacturing as soon as permissible, targeting [to do so] by 3QFY2020, subject to getting the necessary approvals from the authorities. For Malaysia, this would include the Medical Device Authority under the Ministry of Health,” the group’s announcement reads.

It added that the ventilator model is one of a series of models that had been marketed by the multinational for a number of years. “It is because of the acute shortage of ventilators in the global market and the multinational’s intense sense of corporate social responsibility that it decided to release the design of this model to interested parties for production under third-party name via permissive licence to meet the high demand globally.”

For its financial year ended Dec 31, 2019, K-One reported a 10% increase in net profit to RM6.22 million, on the back of a 31.6% increase in revenue to RM97.08 million. The spike was attributed entirely to sales contributions from the cloud business following the completion of the acquisition of a 60% stake in G-AsiaPacific Sdn Bhd in March last year.

K-One shares closed at 17 sen last Wednesday, giving the company a market capitalisation of RM127.56 million. Compared with a year ago, K-One’s share price has declined 29%.

XiDeLang Holdings Ltd  

XiDeLang Holdings, which designs and manufactures sports shoes and apparel in China, announced last Wednesday that it is venturing into the production of stylish, reusable and washable protective masks, in collaboration with Fujian BiTiChong Baby Products Co Ltd.

Fujian BiTiChong is involved in the development and production of baby and healthcare products, including medical-use and regular-use face masks.

XiDeLang anticipates that the demand for stylish, reusable and washable protective masks will be huge and on a rising trend even after the pandemic ends, based on an expected change in the public’s lifestyle and hygiene. The masks will be sold in China as well as overseas.

XiDeLang recently changed its financial year end to June 30 from Dec 31. For the 12 months ended Dec 31, 2019, the company posted a net profit of RM29.04 million on the back of RM474.04 million in revenue.

XiDeLang shares closed at seven sen last Wednesday, valuing the company at RM126.34 million. Compared with a year ago, its share price has dropped 22%.

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