Frankly Speaking: Not all beneficiaries of Covid-19 are winners

This article first appeared in The Edge Malaysia Weekly, on December 21, 2020 - December 27, 2020.
Frankly Speaking: Not all beneficiaries of Covid-19 are winners
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It has been a fruitful year for many healthcare-related companies in terms of earnings and share price gains. But LKL International Bhd’s latest set of quarterly results is a disappointment to its shareholders.

The hospital bed maker slipped into a net loss of RM1.01 million for the second quarter ended Oct 31, 2020, compared with a net profit of RM433,000 a year ago. The weak performance was attributable to a lower profit margin and an increase in certain administrative expenses, which it did not explain further.

Its manufacturing revenue fell 4.6% to RM7.21 million on lower sales of medical beds, while trading revenue was down 22.6% to RM2.41 million on the back of the weak performance of medical devices.

LKL made RM2.5 million and RM1.1 million in net losses for the financial year ended April 30, 2019 (FY2019) and FY2018 respectively, before returning to the black with a net profit of RM4.35 million in FY2020.

Having surged 551.9% year to date, its share price closed at 88 sen last Friday, giving it a market capitalisation of RM416.54 million. Despite that, the stock has actually fallen 56.4% from its intraday high of RM2.02 in August.

Since the onset of Covid-19, LKL has announced a slew of healthcare deals, including supplying personal protective equipment to Sarawak hospitals.

Three months ago, it secured a glove supply contract worth RM78.49 million from Weihai Textile Group Import and Export Co Ltd.

It is also supposed to start supplying nitrile examination gloves this month pursuant to its RM163.2 million contract with Shang Hong International (Hong Kong) Ltd.

Will all these deals help LKL regain its footing?

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