It has been a roller-coaster ride for investors as markets swung from all-time highs in late-2019 to a decade-low in March 2020.
Although it has been nearly eleven months since news of the first outbreak occurred, many companies are still struggling to cope with the economic fallout.
There’s reason to believe next year won’t be half as bad as this year has been.
The announcement of three vaccine candidates from three different pharmaceutical companies Pfizer (NYSE: PFE), Moderna (NASDAQ: MRNA) and AstraZeneca (LON: AZN) has lifted everyone’s spirits and injected a dose of much-needed optimism into the market.
It’s still early days in terms of the logistics, distribution and storage for these vaccines, but countries are already ordering them in bulk to be delivered by early 2021.
Assuming these vaccines do their job, a significant proportion of the world’s population will develop immunity to COVID-19.
The countries that are currently most infected, such as the US and Europe, can then ease lockdowns and reopen their borders.
Many businesses will enjoy a reprieve once this happens, and a sharp recovery may follow.
Here are three blue-chip businesses that are poised to enjoy this upswing in economic activity.
SATS Ltd (SGX: S58)
SATS Ltd is a leading provider of food solutions and gateway services to the airline industry.
The group provides services such as baggage handling, aircraft exterior cleaning and airline catering.
Unsurprisingly, SATS has been badly hit by the onset of the pandemic.
Revenue for its fiscal 2021 half-year ended 30 September 2020 saw a 54.2% year on year plunged to S$440.5 million, largely due to a 71.4% year on year fall in aviation-related revenue.
In the second quarter alone, flights handled by SATS and its subsidiaries fell by 78% year on year to 20,500, while the number of passengers handled plunged by 92% year on year to just 1.8 million.
SATS booked an underlying net loss of S$45.3 million for the first half.
Singapore is negotiating on reciprocal green lane arrangements with several countries to allow business travellers to fly out.
Singapore and Hong Kong also established a travel bubble that allows citizens from both countries to travel unrestricted between the countries, although this arrangement was subsequently suspended in light of a surge in COVID-19 cases in Hong Kong.
These initiatives will spur a tentative recovery for SATS as air travel volumes slowly creep up.
But if the vaccines result in borders reopening and helps to restore confidence in air travel, it will provide a welcome shot in the arm for SATS’ business in 2021 and beyond.
ComfortDelGro Corporation Ltd (SGX: C52)
ComfortDelGro Corporation Ltd, or CDG, is a land transport conglomerate that owns a fleet of around 41,200 buses, taxis and rental vehicles.
The group also runs rail networks in Singapore and operates both the Northeast MRT Line (NEL) and the Downtown MRT Line (DTL).
Its global operations span Singapore, the UK, Australia, China, Malaysia, Vietnam and Ireland.
Due to movement restrictions and telecommuting, CDG has seen ridership plunge sharply when the pandemic first broke out.
In a business update released for its third-quarter, CDG reported that rail, bus and taxi ridership in Singapore has recovered to 55%, 70% and 80% of pre-COVID levels, respectively.
China has also performed well but the UK, Ireland and Australia have remained badly-affected due to the worsening virus situation there.
The vaccines could provide relief to the populations there and allow life to gradually get back to normal, thereby providing a strong uplift to CDG’s businesses there.
A shift to Phase III in Singapore will also further boost CDG’s numbers here as Singapore still contributes to the bulk of operating profits in the first nine months of 2020.
Genting Singapore Ltd (SGX: G13)
Genting Singapore is the operator of the integrated resort at Resorts World Sentosa (comprising hotels, a theme park and a casino), and relies on tourists for the bulk of its business.
As air travel has been severely curtailed during the pandemic, Genting has also suffered a sharp drop in revenue.
The dearth of tourists has hit the casino operator hard.
For its third quarter, total revenue fell by half to S$301 million, while net profit after tax plunged by 66% year on year to S$54.4 million.
If the pandemic is brought under control, air travel can restart and tourism can then flow again.
2021 may see that occurring as the vaccines bring hope that the pandemic can be stopped.
When that happens, Genting should witness a strong business recovery as there has been significant pent-up demand for overseas travel.
Get Smart: Promise of a new day
Interesting days are ahead of us as the world shifts from cowering from the virus to now fighting it with knives drawn.
The local banks may have seen their earnings hit bottom, along with other businesses that may also have passed their nadir.
Paula Abdul sings an encouraging song about the “promise of a new day”.
For investors, we should also face the future with the same confidence and optimism.
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Disclaimer: Royston Yang owns shares in SATS Ltd.
