By Julian Tan
THE Malaysian business community is an enterprising lot. While many businesses lost money due to the restrictions imposed following the COVID-19 pandemic, some seek out opportunities despite of this health crisis.
One formula is for companies to diversify into areas where the potential for growth is immense due to the pandemic, such as into gloves-making or the distribution of COVID-19 vaccines. Entrepreneurs behind some of these corporations waste no time in seizing business opportunities, regardless of what the overall health of the economy is.
Among the examples of companies that have diversified – or expressed intention to do so – include Malaysian property giant, Mah Sing Group Bhd, which is going into rubber gloves manufacturing. Seeing how gloves-manufacturing counters like Top Glove Corporation Bhd and Hartalega Holdings Bhd are having a bull run, Mah Sing decided to jump onto the bandwagon.
Other listed entities which have announced a similar diversification strategy include Luster Industries Bhd, Hong Seng Consolidated Bhd and Mestron Holdings Bhd. Respectively, their core businesses are plastic injection moulding; search and advertising; as well as steel pole manufacturing. The list is not exhaustive as more than a dozen listed companies in Malaysia have announced plans to venture into areas related to COVID-19.
In this respect, investors need to be mindful of the plans by these companies, some of which have zero track record in cutthroat fields, and at a time when the intensity of COVID-19 is waning as global vaccination gets underway. Investors need to look beyond these companies’ Bursa disclosures and the media fanfare that comes along with it.
Often, such announcements elicit excitement in the investing community. Mestron, for example, saw its share price climb to an all-time high of 23 sen, days after its announcement. The same can be said of most other companies.
However, Mestron’s party did not last long. Soon after the company disclosed to Bursa that it had inked a deal with a Chinese company to collaborate in the distribution of COVID-19 vaccines in Malaysia, a firestorm ensued. Many had asked why a steel pole manufacturer could bring in vaccines into the country, resulting in a query from Bursa Malaysia.
Two days later, the company responded that it did not yet obtain approval or a clearance letter from the Ministry of Health to purchase or distribute COVID-19 vaccines from China in Malaysia, contrary to the widespread perception among the investing community.
The Mestron episode could have been an honest miscommunication. But the complexity in doing business resulting from the uncertain environment posed by the coronavirus means investors need to be extra cautious on where to put their money.
This is because some executives have no other desire than to see the share price of their company shoot through the roof, even if it means creating false hopes by employing public relations tactics. It pays for investors to be more discerning. That is their only “protection” from getting their fingers burnt. – Feb 24, 2021
Julian Tan is a Focus Malaysia editorial contributor.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.