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Finding opportunities amidst the pandemic

- by Jeslyn Lau and Ningzhe Kow

The Asia Investment Conference hosted its inaugural webinar on 18 June titled: “Opportunities amidst the Pandemic” with the role of technology being a key subplot. In the article below, we summarize the key takeaways of the discussions.

Resilient business fundamentals to prevail

Companies with resilient business fundamentals are much more likely to survive the storm, and these businesses are also poised for growth during the recovery period.

Technology plays a big role in helping businesses stay resilient through the pandemic, as it has enabled continued operations in a period dominated by shelter-in-place orders. Companies that have made the switch to technology-enabled channels are better positioned to smoothly migrate their workflows and processes online. In contrast, their counterparts that rely on traditional, brick-and-mortar channels may find it harder to adapt to the new paradigm.

The power of branding is another key contributor to a company’s resilience. Strong branding allows companies to mobilise its ‘captive’ user base in times of uncertainty. Loyal and sticky customer bases have helped these business sustain strong operating cash flows, thereby contributing to outperformance relative to their counterparts.

Long-term focus for short-term disruptions

It is easy to lose sight during periods of major disruptions. Focusing on long-term trends can help businesses and investors ride out the crisis.

The pandemic has magnified the implications of many long term trends, including the role of technology in an increasingly connected world. Traditionally hyped technology sub-sectors, such as e-commerce, fintech, artificial intelligence and augmented reality, increasingly find themselves being propelled into a mainstream market. For traditional businesses looking to evolve for the next era, the adoption of these technologies and services become critical.

A shakedown predicted, and a litmus test yet to come

Tech-enabled or not, tripping up is still easy when assessing businesses.

Compared to their digitally-enabled counterparts, prolonged distancing measures will complicate meetings and client due diligence for brick-and-mortar businesses. Such a phenomenon may be especially apparent for traditional financial institutions when compared to their fintech counterparts.

However, this is no time for online-based businesses to gloat. Businesses that have been apparently insulated from the effects of the downturn may still be pricing themselves based on the ‘backlog’ of customers acquired before the pandemic. A more accurate picture of the situation may be revealed in the following quarters when this backlog is eventually cleared.

Act decisively

Decisive investors have the ability to add gems to their portfolios at a discount to valuation.

The overhanging uncertainty in the future has paved the way for more financing conversations in the market, as companies are now more eager to discuss their funding needs with potential investors. This is a unique opportunity for investors to identify and get closer to the most resilient and top-notched businesses.

At the same time, cross-border transactions involving large foreign players have become more difficult. Local asset managers who have a better handle of the competitive landscape and situation on-the-ground have ‘first mover advantage’ when taking advantage of valuation corrections.

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