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EHH

Why Eagle Health Holdings Is Up 13.5% Today

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Eagle Health Holdings (ASX: EHH) rallied 18.9% today, on the back of its strategy to profit from fears around a worsening COVID-19 outbreak, before retreating slightly later in the session. The business announced new medical mask production lines in one of their manufacturing facilities and will comply with both Chinese and international regulations. The facility can produce 6,000 masks per hour, equating to ~300m annually, which will almost certainly be used in light of increasing fears around the new coronavirus.

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A global shortage of masks, partially off the back of worried consumers stockpiling them, almost guarantees near term demand for the product. Additionally, due to a shortage, prices for masks are significantly higher than usual. The time delay in new supply entering the market enables existing producers of masks to extract margins from production which are much higher than historical norms.

Another reason why the stock is rallying is a separate announcement from Zoono (ASX: ZNO) that their microbe shield is 99.99% effective against the coronavirus. While the microbe shield is only used in hand sanitiser, thus being far less effective than a vaccine or cure for COVID-19, demand is still likely to be strong in the absence of a superior solution.

Eagle Health Holdings has an agreement to manufacture and distribute a hand sanitiser based on Zoono’s technology throughout China. Since the company is likely to see higher than expected earnings as a result of the success of product trials, Eagle rallied significantly in today’s session, despite the general downtrend in equities. Shares in both businesses could also rally off the back of demand from investors who are seeking an alternative avenue to hedge the risks which COVID-19 poses to investment portfolios. Since gold, a typical hedge against volatility, has shown mixed results, investors may seek to profit from the higher margins which Eagle and Zoono can generate as a result of the Coronavirus.

 


Disclaimer:
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.
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