IT all started during the height of the COVID-19 pandemic in 2020 with many non-healthcare public-listed companies joining the personal protection equipment (PPE) bandwagon as a mean to drum up their share price.
Amid much fanfare – which somehow bear semblance to the dotcom era – these minnow companies rolled out impressive business plans and unfortunately not all materialised.
This nevertheless caught many newbies and unsuspecting investors off-guard; their joy was short-lived with the stock prices of many PPE aspirant stocks eventually regressed to pre-announcement level.
The emergence of PPE 2.0 players
While many of the first batch debutants have vanished into oblivion as the fly by night nature of their venture got better of them, the second-generation PPE (PPE 2.0) players – seem to be doing things by the book compared to their predecessors.
This is judging from their clarity in the engineering, explanation and execution of their business strategies. In fact, it will not be an overstatement to say that some of their business plans sounded both convincing and viable.
In all fairness, the recent PPE proposals – as per their Bursa Malaysia filings and media statements – are very systematically drafted with details of how the PPE venture will be executed alongside their partners. In fact, they also showed conformity to regulatory requirements.
Below are some recent new PPE ventures whose business details were made public via Bursa Malaysia filings /media statements:
|Date||Company||Business plan||Rationale||Value||Existing Business|
|12 Apr||Luster Industries Bhd||
Glovconcept Sdn Bhd – a 60%-owned subsidiary of Luster’s 56%-owned subsidiary, Glovmaster Sdn Bhd, has entered into an agreement with American Nitrile LLC to provide EPCC services and technology solutions to construct glove production lines for the latter.
The first phase of work included the construction of 12 high speed nitrile glove production lines, with another 72 additional lines within the first 24 months of the Agreement.
|This is in line with US administration’s direction to reduce the dependency and reliance on imports of PPE which is seen as an essential tool to combat the spread of the COVID-19 pandemic||Based on the average cost of US$3.62 mil to construct a glove production line, the construction of up to 84 production lines will generate approximately US$304 mil (or equivalent to RM1.25 bil) worth of work.||Manufacturing; property development and construction; gaming and leisure|
|8 Apr||Iconic Worldwide Bhd||
Iconic Medicare Sdn Bhd, a wholly-owned subsidiary of Iconic Worldwide has entered into a MOU with Hong Kong-based Limmas Corporation Ltd for the sale and purchase of 1.2 billion Iconic Powder Free Nitrile Examination Gloves over a 12-month period.
However, the company’s manufacturing facility for gloves and face masks has only reached 70% completion – which is way ahead of schedule (although the group claimed that it has already started installation of its glove production machinery).
|Offer new business opportunities that will expand its revenue base and enhance shareholders’ value and reduce the reliance on existing business ventures||N/A||Tourism, property development and manufacturing of PPE|
|9 Apr||Parlo Bhd||Entered into a MoU with a four-month validity period with PPE supplier SimplyK Sdn Bhd to explore a joint venture or acquisition of SimplyK on the back of potential rising demand for PPE in view of the ongoing COVID-19 pandemic.||N/A||N/A||
Travel management and services group
Interestingly, with investors now wary of the PPE hype, there is lesser excitement in the air when a PLC announces its PPE venture. As such, the share price of Luster Industries, Iconic Worldwide and Parlo did not ‘shoot up’ upon when the three companies publicly announced their ventures.
Abidance of disclosure guidance
On 12 June 2020, Bursa Malaysia cautioned all listed companies to avoid using “exaggerated”, “flamboyant” or “overstated” words in their disclosures on COVID-19-related investments to prevent unwarranted price movements.
The disclosure guidance was issued in response to the increased COVID-19-related disclosures where PLCs were taking advantage of the business opportunities arising from the pandemic.
These were observed by way of various memorandum of understanding, letter of intent and distributorship agreement by the companies seeking to manufacture PPE devices in the form of face masks, hand sanitisers, gloves, distribution of COVID-19 rapid diagnostic test kits, development/distribution of health supplements, ventilators, to name a few ventures.
Stressing on the need to provide fair and accurate disclosure, Bursa Malaysia said that any disclosure on COVID-19 related investments should contain several material information to aid investors in making an informed investment decision.
These include total capital and investment outlay, plans to bring the venture on-stream, impact on its profitability, relevant regulatory approval required, business risks or exposure and prospects of such investments.
“Further, listed issuers should proactively monitor and provide regular updates on the COVID-19 related investments, in the event of any material development or on a periodic basis as required under the Main Market and Ace Market Listing Requirements,” added the market regulator.
In this regard, it seems that the majority of the PPE 2.0 players have taken heed of Bursa Malaysia’s disclosure guidance – the ultimate aim of which is to ensure that the players deliver their part of the bargain to investors.
Once bitten, twice shy
However, investors and minority shareholders alike are still advised to exercise diligence, for all that glitters may not be gold.
They must not trust what they read/see on the surface; they must be able to read between the lines and make informed decisions. Some areas to consider include the company’s financial strength, its performance track record and the reputation of the board and major shareholders.
Likewise, they must refrain from blindly following the advice of the so-called investment gurus who are out to tempt them with the potential-yet-unviable ventures of the PPE 2.0 players.
There is a good chance that these gurus could be wrong or worse still, working in cahoots with other market manipulators. It is best for investors to conduct their own research on the company that they wish to invest in.
Whenever there is doubt on the validity of a claim, investors should take further initiative to verify the claims and apply a huge dose of common sense. Often enough when our instinct tells us that something is too good to be true, it is likely to be so.
It is uncanny how often our initial gut-feel is right. – April 19, 2021
Devanesan Evanson is the CEO of the Minority Shareholders Watch Group