Will Your Investments Survive The Heatwave In Singapore & Malaysia?

Malaysia was forced to close its school on 25 April, when temperatures hit 37 degrees for three consecutive days.

Northern Malaysian states of Perlis and Kedah fared worst when temperatures hit as high as 40 degrees. Singapore broke its own re cord on 19 April, when average temperature hit 30.6 degrees against normal temperatures of 28 degrees.

If you are staying in Choa Chu Kang, you have my sympathies because you are staying in the hottest spot in Singapore with 36 degrees. It was just 1 degree shy of the Malaysian standard. So it seems that the higher north you live, the hotter you get.

So how could this matter to you as an investor?

For a start, do you know that Malaysia supplies two-fifths of our vegetable and poultry requirements, over a third of our fruits, and three-quarters of our eggs last year?

When temperatures go above the threshold of 35 degrees, vegetables can start to grow very slowly. The supplies had dropped by a fifth, and eggs supply had already fallen by 10%.

For farmers that use open farming techniques, they have to use more water (we will get to the investing impact of this topic in the next article) for their plants and livestock. This translates to higher cost for them.

For farmers that use an enclosed environment, they control the internal farming climate with higher electricity cost.

When I knew that eggs supply had fallen by 10%, Chew’s Group (SG: 5SY) came to mind. Whether it is designer eggs, generic eggs or liquid eggs, Chew derived 91% of its revenue from eggs according to its latest annual report.

Mewah International (SGX: MV4) manufactures vegetable oils. You might even have bought one of their Moi brands of vegetable oil before.

Mewah impressed the market by increasing their net profit by 141% between in 2015, despite falling revenue. Can they sustain their cost containment if the cost of raw material should rise?

After all, 53% of their revenue comes from Malaysia and Singapore. If you zoom into their bulk business, Singapore and Malaysia account for a massive 71% of revenue.

When it gets hot, I get thirsty more easily. Even the government is advising people to drink more water.

As for me, I am likely to get reach for a can of H-Two-O, Pink Dolphin or Justea which are marketed almost everywhere in Singapore. Yeo Hiap Seng Ltd (SGX: Y03) happens to market these brands in Singapore.

Isn’t it great that Singapore accounts for 29.76% of revenue and Malaysia accounts for 41.59% in 2015?

If you think Singapore and Malaysia are having a tough time in the heat, spare a thought for the people in India. Apparently, it is possible to cook an omelette on the ground!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.