ASX shares have been sent tumbling in recent weeks as the economic impacts of the coronavirus outbreak have been felt across the world. However, it hasn’t been doom and gloom for everyone on the ASX.
Shares in New Zealand-based biotech company Zoono Group Limited (ASX: ZNO) have skyrocketed over 250% higher so far this year, with the majority of those gains coming in just the last month.
The company, which develops antimicrobial skin and surface sanitisers, has emerged as a surprising leader in the fight against the spread of the coronavirus.
Its sanitisers use newly developed polymer technology to kill pathogens on contact. When it is applied to skin or surfaces, it leaves behind a microscopic layer of tiny “pins” which attract pathogens and pierce their cell walls, killing them and preventing mutation. It can continue to be effective for up to 30 days when sprayed on surfaces, and is non-corrosive, gentle on skin and environmentally friendly.
What’s been going on?
Sales of Zoono’s products have been going through the roof this year. In mid-February, Zoono announced that its online sales were averaging NZ$30,000 to NZ$50,000 per day, and its cash resources had increased by over 30% to NZ$4 million since the beginning of this year alone.
Demand for its products had increased by such a degree that the company was planning on moving to a new, larger warehouse and office facility and was in the process of hiring more staff.
Then, last week, the really big announcement arrived. Zoono’s product had been shown to be greater than 99.9% effective against the new coronavirus. Zoono’s shares shot up 17% on the day of the announcement and a further 19% the day after.
Zoono already has a distribution agreement with China-based company Eagle Health Holdings Ltd (ASX: EHH) to sell its products into China. The co-branding deal means that Zoono can benefit from Eagle Health’s extensive distribution channels throughout the country. Eagle Health will import Zoono’s sanitiser formulations and package it in its new pharmaceutical facility, which it expects to have up and running in early March.
Eagle Health has historically specialised in the distribution of health food and dietary supplements throughout China, but investors have responded positively to its new agreement with Zoono, pushing its share price up over 50% in the last month to its highest point since last October.
The exponential gains made by Zoono over the last month may mean that its shares have become overvalued at these prices. If you are interested in investing, it may be better to wait for a pullback in its share price (if it comes) before pulling the trigger.
It’s also worth keeping in mind that there is also the risk that, should the spread of coronavirus be contained, demand for Zoono’s products may decrease just as fast as it ramped up.
But while we may be experiencing something of a “hand sanitiser bubble” right now, the efficacy of Zoono’s product has been proven. Even once the coronavirus is under control, the outbreak may linger in the popular consciousness for some time, especially in China, meaning demand for hand sanitisers may still remain high.
Whatever your thoughts on the developing coronavirus epidemic, Zoono has become an interesting case study for companies that are able to succeed in times of global crisis.
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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.