Coronavirus and the associated economic downturn hit the share market hard. The S&P/ASX 200 (ASX: XJO) is down 25% from its February highs, and hit a low of 4,546 in March. But the impacts have not been uniform. Although many ASX shares are suffering, some are thriving in current conditions.
We take a look at ASX shares in 4 sectors that are surging ahead, despite the current market turbulence.
Supermarkets
Panic buying led to unprecedented demand for supermarkets, which have benefitted with surging sales. At the time of writing, Coles Group Ltd (ASX: COL) shares are up 6% since the start of the year, while Metcash Limited (ASX: MTS) shares have risen 10%. Woolworths Group Ltd (ASX: WOW) shares have not fared quite so well and are down 3% since the start of the year.
Demand increased so dramatically in late February that supermarkets were forced to introduce limits on purchases of popular items and suspend deliveries of online orders. Many of these restrictions remain in place as above average buying continues.
As reported by the Australian Financial Review (AFR), UBS estimated supermarket sales were up more than 25% in March. UBS is expecting supermarket sales to rise 9.5% in the March quarter and 6.1% in the June quarter, before moderating to around 5% in the September and December quarters.
Gross margins are also expected to increase due to reduced wastage and promotions, although the cost of doing business is expected to increase due to higher supply chain and store staffing costs. Nonetheless, there is no doubt that the supermarkets are benefitting from the current environment, and their defensive nature means they are likely to weather any future storms. After all, people need to buy food regardless of economic conditions.
Food producers
Much like supermarkets, food producers have benefited from increases in grocery shopping as well as investors seeking defensive assets. Shares in Costa Group Holdings Ltd (ASX: CGC) are up 10% since the start of the year after a difficult 2019 in which the fruit grower downgraded guidance due to the impacts of drought.
In late February, Costa Group reported its full year results recording solid revenue growth of 5.8%. High water expenses were incurred due to drought conditions with earnings falling 21.5% on the previous year. Nonetheless, rainfall in late January which continued into February restored a high level of water security to berry and tomato growing locations.
Recently pricing levels have improved considerably across most categories, particularly berries and mushrooms, and the outlook for the upcoming Far North Queensland berry season is favourable. Costa Group is expecting net profits of around $56.6 million for calendar year 2020, subject to the impact from a hailstorm late last year on citrus crops.
Shares in A2 Milk Company Ltd (ASX: A2M) have also held up well through current turmoil, and are up 20% for the year. a2 Milk produces milk and infant formula products with major markets in Australia, New Zealand, China, and the US. It recently announced its expansion into Canada under a licensing agreement. a2 Milk also holds a 19.84% interest in Synlait Milk Ltd (ASX: SM1).
a2 Milk reported strong results in the first half, with revenue up 31.6% to $806.7 million. Net profit after tax (NPAT) grew 21.1% to $184.9 million. Strong growth in China label infant nutrition was reported, with sales doubling to $146.7 million and distribution expanded to 18,300 stores.
For the full year, a2 Milk's anticipated continued growth in revenue across key regions is supported by marketing investment in China and the US. Given the essential nature of its products to many Chinese families, demand has remained strong, particularly through online and reseller channels, with revenue for the first 2 months of FY20 above expectations.
Healthcare
At the time of writing, shares in ResMed Inc (ASX: RMD) and Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) are up 11% and 23%, respectively, this year. Both healthcare companies make respiratory devices, which have been in high demand during the pandemic.
Bucking the stream of guidance downgrades which has plagued the ASX, Fisher & Paykel Healthcare actually upgraded revenue and earnings guidance last month. Full year operating revenue guidance was upgraded from $1.2 billion to $1.24 billion and NPAT is expected to be in the range of $275 million to $280 million.
Fisher & Paykel's managing director and CEO Lewis Gradon commented:
Our respiratory humidifiers and consumables are directly involved in treating patients with coronavirus. We have seen an increase in demand globally and have ramped up our manufacturing output. At the same time, we have benefitted from stronger sales in our Homecare product group and a weakening of the NZ dollar.
ResMed manufactures ventilators and other life-saving respiratory devices. The company has been focused on boosting its manufacturing capability to meet increased demand. Output of ventilators was to double or triple, while ventilation mask production was scaled up ten-gold. The company has also been enlisted by the Australian Government to support its coronavirus response.
"As a global leader in respiratory medicine, ResMed stands with the world in the face of the latest coronavirus disease and is ready to help mitigate its effects, helping people breathe while their immune system fights this virus," CEO Mick Farrell said.
Many ResMed ventilators are cloud-connected which enables doctors to remotely monitor their patients. The highly contagious coronavirus makes a strong case for the use of digital health and remote monitoring that ResMed enables.
Technology
Shares in Whispir Ltd (ASX: WSP) surged 60% in a day when the company announced its platform was being used by Victoria's Department of Health and Human Services (DHHS) to interact with Victorians as part of its coronavirus containment plan.
Whispir's SaaS communications workflow platform automates interactions between businesses and people and is used by more than 500 enterprise customers. Qantas Airways Limited (ASX: QAN) uses the platform to manage critical incidents, and Telstra Corporation Ltd (ASX: TLS) to communicate rapidly with customers and staff. New Zealand police use the platform to communicate with the hearing impaired community.
The Whispir platform allows for real time data driven communications and provides users with rapid insights. The more accurate data provided by the platform enables users to quickly make informed decisions about the optimisation of services. Support for the platform continues to build, with annualised recurring revenue increasing 22% in the first half and average recurring revenue per customer up 17%.
