Stockpile Shares, Not Surgical Masks

SingaporeHazeYou know that the market has gone a little crazy when the Straits Times Index (SGX: STI) is down 1.5% on the week, while shares in Medtecs (Catalist: 546) is up a whopping 40%.

In the case of the benchmark index, the fall can be traced back to some hazy comments from the Federal Reserve chief, Ben Bernanke, about when he might consider dialling back his money printing operation. But in the case of Medtecs, it was just the haze – the Singapore haze.

Medtecs is a S$37m Singapore-quoted company that makes woven and knitted medical textile products (gowns and bandages to you and me) and, you guessed it, disposable surgical masks.

According to the Business Times, the Singapore government has ample supply of face masks – nine million to be precise, which I suspect is more than enough for anyone who wants one. It has also asked the public not to stockpile them. Nevertheless, the market believes that demand for surgical masks could turn around falling sales at the medical supplies company.

But Medtecs will need more than a brief spell of Indonesian smoke to reverse declining revenues. In 2007, it reported annual sales of S$130m; last year sales were just S$64m. Meanwhile, profits were unchanged at S$1.5m, which would value the company at around 25 times historical profit.

It is not entirely out of the question that some short-term demand for surgical masks could provide a fillip to sales. But I doubt if many people, apart from healthcare professionals, will want to wear them all year round.

That said, I did spot someone remove his protective mask to have a quiet smoke, which I am sure defeats the purpose of wearing the mask in the first place. Mind you we live in strange times – a time when stockpiling surgical masks for the short-term seems more of a priority than stockpiling cheap shares for our long-term.

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