As we enter the fourth month of the COVID-19 pandemic, it’s becoming clear that businesses that are exposed to travel, tourism and hospitality have been hit badly.
However, some businesses have fared better than others.
In fact, not all companies’ share prices crash along with the general market.
Businesses that are directly impacted by the source of the crisis may suffer worse than companies who are on the fringe, or in industries that are unaffected.
On the flip side, there are companies that are doing well because the crisis has driven up demand for their goods and services.
Here are three companies whose share prices have performed better than the Straits Times Index (SGX: ^STI).
VICOM Ltd (SGX: V01)
VICOM is a leading test and inspection centre, with two main divisions — the first deals with vehicular inspections for cars and buses, while the other handles non-vehicle testing.
Its share price has dipped just 4.5% year-to-date, performing much better than the index’s 20% decline.
The group has a leading market share in the vehicle inspection market.
With more COEs being renewed as people hold on to their older cars, VICOM is expecting a higher volume of vehicle inspections as older cars need annual inspections instead of biannual ones.
An upcoming catalyst comes in the form of the “Point-to-Point Passenger Transport Bill” passed by Parliament in August 2019.
The new bill requires all licensed ride-hail and street-hail service providers with a fleet of more than 800 vehicles to have their vehicles undergo periodic inspection from July 2020.
There is also a future catalyst in the form of the mandatory inspections for personal mobility devices (PMD) come April 2022. PMD will henceforth have to be inspected every two years.
Based on the above, the future looks promising for VICOM even as its non-vehicle inspection division may be affected by the economic fallout from COVID-19.
Singapore Exchange Limited (SGX: S68)
Singapore Exchange Limited, or SGX, is Singapore’s sole stock exchange operator.
The group provides a platform for the buying and selling of securities such as equities, fixed income and derivatives. SGX also provides listing, clearing and settlement services.
Year-to-date, SGX’s shares have risen by around 9%.
This optimism stems from SGX’s recently reported February 2020 market statistics.
Derivatives trading volume was lifted to a record high, driven by the demand for risk management solutions across financial and commodity markets.
Volume was up 32% year on year, and came with a surge in participation outside of Asian time zones.
The statistics demonstrate the strong demand for SGX’s risk management tools in the form of derivatives, futures and options.
In addition, the group also pays out a quarterly dividend of S$0.075, amounting to a full-year dividend of S$0.30. At the moment, the dividend yield stands at around 3%.
Top Glove Corporation Berhad (SGX: BVA)
Top Glove is the world’s largest manufacturer of rubber gloves for the healthcare industry.
Since the COVID-19 outbreak, demand for gloves has spiked upwards, and Top Glove has seen its share price soar 34% year-to-date.
The group has received strong orders from not just Asian countries, but also Europe and the USA as the pandemic creates an acute shortage of gloves at hospitals worldwide.
Top Glove is already pushing its production at close to 100% utilisation, and it has reported a doubling of its sales order book in its second-quarter fiscal year 2020 earnings report.
New capacity is coming on stream this year which will add 70 new glove production lines and boost capacity by 8.2 billion pieces per year.
By the end of 2021, the group will have a total of 39 operational glove factories, with 861 glove production lines producing a total capacity of 91.1 billion gloves per year.
Get Smart: Look out for quality companies
It pays to look out for quality companies during crises.
These are companies that are able to weather the storm better than the average company.
Their share prices are generally also more resilient as they can continue to generate strong cash flows and even pay out dividends.
Investors should definitely consider such companies for their investment portfolios.
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Disclaimer: Royston Yang owns shares in VICOM Ltd and Singapore Exchange Limited.
