Over the past few months, we are constantly bombarded by the news of demonstration and mass protests in Hong Kong. What started as a movement against a controversial law of an extradition bill proposed by the Hong Kong government has expanded into something much bigger. Hong Kong is now facing a serious political crisis with repeated street protests that gets more and more violent each week.

Despite Chief Executive Carrie Lam announced on 4th September 2019 that she would formally withdraw the extradition bill, the people are still not satisfied. Until the five demands are met, the protests and the social movement will not stop. Unrest intensifies and it seems that the Hong Kong people are getting more frustrated.

Despite the protest is aiming at the Hong Kong government, this crisis has caused collateral damage to its stock market. We can see its gains for the year wiped out as investors want to sell off companies with large Hong Kong domestic exposure. Now, as a value investor with a contrarian view, will you see this as an opportunity to look for great companies in Hong Kong? You might want to have these two companies under your radar before they get popular among retail or institutional investors.

CHINA MAPLE LEAF EDUCATIONAL
SYSTEMS LIMITED

China Maple Leaf Educational Systems Limited (“CML”) operates bilingual private schools and preschools in the People’s Republic of China under the Maple Leaf brand name. CML is a leading international school operator, from preschool to grade 12 (“K-12”) education, in the People’s Republic of China. Judging by the profile of this company, we know that the main business of CML is at China. Therefore, many investors have misjudged the business model of CML, thinking their schools are in Hong Kong because their company is listed there.

What we love about CML is that the education industry is a recession-proof business. For Chinese culture, a strong and solid education is a must. As Chinese parents becoming wealthier, they can afford to send their children to private international schools. They generally believe these schools that provides English education will better prepare their children for overseas education. They also realise that China’s influence on the global economy is becoming more and more important. Therefore, if their children receive a bilingual education in China, followed by university studies in an English-speaking country, their children will be better equipped with the language and cultural skills that can open the doors to better job opportunities in China and internationally.

CML have many different strategies to grow their business. Acquisition is one of the many options. Most of their schools are built by themselves or through asset-light models. However, in recent years, CML focus mainly on asset light model, mostly in partnership with the government. CML’s asset light model is a unique way of growing their business whereby the other party will provide all the existing land, buildings and facilities and CML will provide the education materials, teachers, staffs and their brand name.

Source: WealthPark

BAMBOOS HEALTH CARE HOLDINGS LIMITED

Bamboos Health Care Holdings Limited (“Bamboos”) provides a wide range of professional healthcare staffing services and solutions in Hong Kong. They deliver the most comprehensive and well-rounded strategic staffing solutions by arranging a wide range of healthcare personnel including nurses, doctors, midwives, therapists, clinic assistants, health care assistants, health workers, as well as personal care workers. Currently Bamboos have a talent pool of over 20,000 qualified healthcare personnel.

What is amazing about this company is their wide client base. Their clients include hospitals under the Hong Kong Hospital Authority, private hospitals, clinics, nursing homes, healthcare organizations and even individuals. So essentially this means whenever their clients are short of manpower or in need of extra assistance, Bamboos is there to provide customized, reliable and timely healthcare staffs to them during seasonal peaks, emergencies, maternity leaves or sudden health crisis.

There’s a saying, “When the economy is sick, look to healthcare for the cure.” This is simply because people will get old or get sick, no matter what the state of the economy. The demand for healthcare will always be there. Besides, health is something people won’t sacrifice on and will be on their top priority of expenses, especially if it’s their parents or loved ones.

Bamboos is now riding on a growing industry. Hong Kong faces an increasingly worrying demographic challenge where there is sharp growth in Hong Kong’s elderly population. A large population of seniors would also put a huge demand on medical and care services. Not only that, on January 2019, the Association of Hong Kong Nursing Staff protests and demand action from the government over staffing shortages, saying public hospitals need to hire more staff, not money to tackle an ongoing staffing crisis at public hospitals. As such, there is increase in demand for healthcare staffing solution services from both institutional and individual clients but low in supply. Bamboos is perfectly positioned to grab this opportunity.

Source: WealthPark

So, what do you think of these 2 companies? Will the fundamentals of their business be affected by the protest? The demonstration has been going on for weeks and such an unfortunate event is something we can’t predict and control. Nonetheless, will this protest last forever? Will Hong Kong’s economic slowdown stay flat in perpetuity? The core of a good investor is to have the ability to see opportunity in any crisis and above all, the guts to go against the herd. Again, Warren Buffet’s timeless quote is now more relevant than before, “Be fearful when others are greedy and greedy when others are fearful.” The decision to invest lies in your hands.

Disclaimer: All facts and opinions presented are for educational purposes only. This is not a recommendation to buy or to sell. The author involved in the writing of this message has no vested interest in the companies. Please consult a professional for expert financial or other assistance or legal advice.

This article was written by Team VIC
Team VIC is formed by experienced and well-trained individuals from Value Investing College (VIC). The team has been consistently studying the latest stocks market trend in order to focus on educating the layman on investment principles and techniques.

3 thoughts on “Has Opportunity Arises During Times of Crisis?”

  1. Anuar says:

    very interesting

  2. sanjay Mishra says:

    Hello VIC Team,

    Thank you for this article. Data wise BAMBOOS seems to be attractive one.
    there is not much info in internet about this I did some study and I have got few question, please can you comment on it-
    1) What is the MOAT for BAMBOOS?
    2) What is the risk – I see the biggest risk is its very crowded segment
    3) Their geographic distribution and further growth plan- I dont see there growth plan for them outside HK in their report , however I see they do have presence in Singapore also (https://bamboos.com.sg/join-us/ ).
    4) Any things as a investor I need to pay special attention to a staffing company like BAMBOOS .

    Thanks a lot

    1. Team VIC says:

      Hi Sanjay,

      Glad that you enjoyed this article.

      Here’s our comment:

      1. After doing our research we conclude that BAMBOOS has brand as a moat albeit a weak one.

      2. The risk is human capital risk where they need specialised personnel in medical and nursing skills.

      3. Their segment is mainly in HK. Their growth plans according to their annual report is to still concentrating on HK as there’s still growing demand for their services.

      4. Pay attention to HK ageing population.


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