Potential Winners & Losers with the latest Omicron Variant

The latest Omicron variant is no doubt another hurdle towards full recovery of the global economy as various countries began tightening COVID-19 measures to fight against this highly transmittable new variant.

In Singapore, Finance Minister Lawrence Wong, who co-chairs the multi-ministry task force, mentioned that it is inevitable that the Omicron variant will spread within the community and Singapore must expect a new wave of COVID-19 cases in the coming days and weeks.

With this in play, we will be looking at some of the winners and losers from this latest variant.

Potential Winners from Omicron Outbreak

1) Q&M Dental Group Limited (SGX: QC7)

Q&M Dental Group Limited (“Q&M Dental”) is a leading private dental healthcare group in Asia. In 2020, the Group also expanded into the medical laboratories and research industry with the incorporation of Acumen Diagnostics Pte. Ltd. (“Acumen”). Acumen, a 51% owned subsidary, currently focuses on the manufacture, sale and distribution of COVID-19 diagnostic test kits, as well as COVID-19 testing.

Share Price Performance

For the past 3 months, Q&M Dental’s share price has hovered around S$0.55 and S$0.67. Generally, its share price is still on an upward trend, with a Relative Strength Index (“RSI”) of 50 and signs of a rounding bottom, which indicates that share price movement could bottom out already.

In the press release dated 16 December 2021, Acumen has been granted by Ministry of Health to provide offsite COVID-19 polymerase chain reaction (“PCR”) swab services and serology sample collection.

The rapid spread of the Omicron variant will enable Q&M Dental to benefit from this new development as testing demand remains elevated.

2) Raffles Medical Group Limited (SGX: BSL)

Raffles Medical Group Limited ("Raffles Medical”) is one of the leading integrated private healthcare providers in the region, providing a continuum of services from primary and tertiary care to health insurance for people across Asia.

Raffles Medical operates in 14 cities in five countries in Asia. These includes three tertiary hospital sand over 100 multi-disciplinary clinics, offering services such as health screening, specialist care, diagnostic radiology, dental and traditional Chinese medicine.

Share Price Performance

After experiencing a sharp sell down coupled with high volume in October 2021, Raffles Medical’s share price has been trading within a range of between S$1.29 and S$1.41. With the strings of share buyback (Light blue circle) in December, this will allow its share price to find some support at this level.

With Singapore’s moving towards administrating booster shots for its population, Raffles Medical will stand to benefit as they have various vaccination centres across Singapore. Furthermore, the increased demand for pre-event testing as well as PCR tests will also contribute positively to the Group.

Potential Losers from Omicron Outbreak

1) SIA Engineering Company Limited (SGX: S59)

SIA Engineering Company Limited (“SIA Engineering”) is a provider of aircraft maintenance, repair and overhaul (“MRO”) services in Asia-Pacific. The Company's segments include airframe and line maintenance and engine and component. The airframe and line maintenance segment provides airframe maintenance, line maintenance, and fleet management programs.

Share Price Performance

After hitting a high of S$2.48 in mid-November, SIA Engineering’s share price has fallen by more than 10% in just 2 weeks. Despite the slight rebound in December, the uptrend was not able to sustain and resume its decline. Therefore, we can see a pattern of “Lower Low” and has since found some support near the price level of S$2.15.

With Singapore freezing new ticket sales for Vaccinated Travel Lane (“VTL”) from 23rd December to 20th January amid Omicron concerns, this will have a negative impact on the overall recovery in the airline industry.

2) CDL Hospitality Trusts (SGX: J85)

CDL Hospitality Trusts (“CDLHT”) is one of Asia’s leading hospitality trusts with assets under management of about S$2.9 billion as at 30 June 2021. CDLHT was established with the principal investment strategy of investing in a portfolio of hospitality and/or hospitality-related real estate assets. As at 30 June 2021, CDLHT owns 15 hotels and two resorts comprising a total of 4,631 rooms as well as a retail mall.

Share Price Performance

After experiencing a strong uptrend from the start of October till November, CDLHT’s share price has declined by more than 15.6% and hit a low of S$1.07 in December. Subsequently, its share price has bottom out recovered slightly and currently is showing a pattern of a “Higher High”.

In the business times article on 27th December, Singapore’s hotel sector has recorded its highest occupancy rates and revenue per available room (RevPAR) in November since the Covid-19 pandemic decimated the tourism industry.

However, with the freezing of VTL, we can expect the industry to take a slight hit as the potential drop in tourist arrivals figure could cast some negativity towards the industry.

Conclusion

To conclude, both Q&M Dental and Raffles Medical are expected to continue riding on the pandemic wave as the demand for testing services and test kits are expected to remain elevated. In particular, the administration of booster shots will benefit Raffles Medical given that their existing vaccination centres are already put in place.

Meanwhile, re-opening plays such as SIA Engineering and CDL Hospitality may take a hit as the latest freezing of the VTL will have an impact on flight demand and tourists' arrival.

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