Medtecs International Corp Ltd - CGS-CIMB Research 2020-06-22: Vigilance Against Pandemics


Medtecs International Corp Ltd - Vigilance Against Pandemics

  • Medtecs International is a medical consumables supplier. According to the management, 1Q20 net profit grew 1,518% y-o-y due to strong demand for PPE.
  • Management has guided that 2Q20F net profit will exceed that of 1Q20.
  • On 19 Jun 2020, Medtecs International's Singapore share price (S$0.295) was trading at a 37% discount to the S$ equivalent of its TDR price of S$0.47.

Medical consumables supplier

  • Medtecs International Corp Ltd (SGX:546) commenced operations in the Philippines in 1989 and has offices in Singapore and Taiwan. Its factories are located in the Philippines, China and Cambodia.
  • Other than its Singapore listing, Medtecs International also has Taiwan Depository Receipts (“TDR”) listed on the Taiwan Stock Exchange (TWSE).
  • Under its Original Product Manufacturing (OPM) segment, Medtecs International manufactures its own brand of medical consumables (including surgical masks), hospital and work wear apparels. Medtecs International also provides hospitals in Taiwan and the Philippines with integrated services including the rental and laundry of linens and management of laundry facilities.

Expanding surgical mask production

  • In FY19, Medtecs International’s OPM segment accounted for 77% of its revenue. According to Medtecs International, in FY19, 81% of its products were exported to the European Union region, 10% to Asia Pacific countries and 9% to the US.
  • In its FY19 Annual Report, Medtecs International revealed that it will expand its Philippine factory capacity in FY20F to produce more masks due to stronger demand arising from the Covid-19 pandemic. In FY19, Medtecs International’s single largest customer accounted for 28% of its revenue.

Net profit grew 1,518% y-o-y in 1Q20

  • On 5 May 2020, Medtecs International provided an update on its first quarter performance. Citing strong demand for personal protective equipment (PPE) due to Covid-19, the group reported that its 1Q20 revenue grew 138% y-o-y, while its net profit grew 1,518% y-o-y.
  • Medtecs International also updated that it doubled its production of PPE in 1Q20.

Management guides that 2QF performance will exceed that of 1Q

  • According to the management, with the continuing spread of Covid-19 around the world, Medtecs International has received more purchase orders for its products, and expects revenue and profit growth in 2Q20F to exceed that of 1Q20.

William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-06-22
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