We are back in lockdown again. It is disappointing. But we might have guessed that something like this would happen.
That’s because this virus is sneaky. It will do anything it can to survive. So, as we try to come to grips with the pathogen, it could be a case of taking two steps forward and one step back.
It could be a frustrating journey for many of us out of the pandemic. We may even have to learn to live with the virus in our midst for a long time. Remember it took around 200 years to eradicate smallpox.
No one is suggesting that it will take anywhere as long to overcome COVID-19. But it could take some time before life returns to anything that resembles normality. Maybe the way that we are living now will become the new normal.
Burn and soak
Maybe we will have to go through repeated burn and soak cycles until we can stop COVID-19 from mutating. When it looks like we have slowed the rate of spread, lockdown measures could perhaps be relaxed a little.
During that time, we can start doing some of the things we once enjoyed before the viral spread becomes too uncomfortable again. Then, we might have to soak to reduce the rate of community transmission.
Thing is, who really knows what is the best way to tackle COVID-19? For instance, the US has now said that masks are now unnecessary. The UK is pushing ahead with its reopening. But Japan has declared a state of emergency in some areas, and Malaysia has reintroduced its movement control order.
So, for each country, it’s a case of what seems to work for them.
Outlook for companies
Businesses have learnt to adjust to the virus. Allowing staff to work from home doesn’t seem to be that much of a shock to the system anymore. Restaurants have adjusted their menus to cater for home delivery. Many retailers have embraced e-tailing.
The upshot is that we are prepared to adjust, adapt, and accommodate. It is how we survive hardship. Recently, we have seen how a number of Singapore conglomerates have adapted by jettisoning parts of their business to go asset light.
Sembcorp Industries, Keppel Corp, CapitaLand and SPH have made some crucial strategic decisions to streamline their operations to become more agile. At the risk of mixing religious metaphors, it could have been for them an epiphany that there can be no sacred cows in a changing world.
Point is, it could get harder for some companies to rely on increasing their net income to generate an acceptable return on shareholder funds. Those with pricing power might be able to pull it off.
Another way could be to borrow more, which could be risky if interest rates should rise to reduce inflationary pressures.
What’s left is to try and do more by employing less assets. It is never a bad idea to improve efficiency. A pandemic could be just the right moment to bump up the asset turnover.
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David does not own shares in any of the companies mentioned.