Cambodia: Medtecs boosts face mask output on flu fears

Medtecs boosts face mask output on flu fears

Wednesday, Apr 29, 2009 9:21PM UTC

By Neil Chatterjee and Eveline Danubrata

SINGAPORE (Reuters) - Medical product manufacturer Medtecs International is ramping up production of face masks and disposable gowns, and could boost output five-fold if demand spikes on swine flu fears.

"Psychological panic is still there - that will create demand," CEO Clement Yang told Reuters in an interview on Wednesday. "During SARS, sales in those items went up four to five times," he said, adding that Medtecs could meet such demand.

Medtecs' Singapore shares have more than doubled this week, amid a threat of a pandemic from a new swine flu strain that has killed up to 159 people in Mexico and that could provide a windfall for some healthcare companies [ID:nFLU].

Yang said he thought the share price rally, to S$0.11 on Wednesday from S$0.05 last week, was justified.

Medtecs, which has factories in the Philippines, China, Vietnam and Cambodia and a market cap of $30 million, exports 70 percent of its products to the United States. Most revenue comes from making hospital linen and healthcare items, with global competition from Johnson & Johnson and 3M Co .

"Today if the situation gets worse, and Western governments get moving, demand will be enormous," Yang said.

U.S. demand for disposable medical items rose 20 percent during SARS, which killed more than 800 people around the world in 2003, he added.

Costs would rise given the need to boost production quickly and, going on precedent, the firm could lift prices by 50 percent and improve margins, Yang said.

Analysts at DMG Research on Tuesday picked out Medtecs and glove maker Riverstone as firms in Singapore that could see increased demand from the new flu outbreak.

Some analysts have cautioned that the boost to sales for such healthcare firms could be muted since many governments have already built stockpiles because of the previous avian flu risk.

"Most developing countries are not prepared," Yang said.

The firm has funding to double capacity at its plant in Cambodia by the end of the year. It sees 20 percent annual growth in its hospital services business, which makes up 15 percent of revenues and has higher margins than manufacturing, Yang said.