React should benefit from coronavirus concerns

With today’s announcement by Prime Minister Boris Johnson that the spread of coronavirus in the UK “will get worse before it gets better” the impact of this global pandemic is starting to be felt here in the UK.

As the number of infected people hits 40, businesses are losing contracts, the stock market is falling, schools are closing and there is a general air of unease as the Government attempts to stop the spread of this virus.

Yet, it isn’t all doom and gloom, particularly for savvy investors.

Golden opportunity

For those seeking a hitherto overlooked stock that can benefit from measures to prevent the spread of Coronavirus, yet offers downside protection when the virus is eventually subdued, React could provide a golden opportunity.

Although this specialist cleaning company has almost tripled in price since first tipped here last year, the impact of the coronavirus means that its specialist deep cleaning services to eradicate infection in schools, hospitals, businesses and public transport will be very much in demand. For example, it has been reported that 15 schools have closed, all of which are likely to require deep cleaning.

The quality of React’s deep cleaning was recognised as recently as February when it was awarded a £121k contract to deep clean a prestigious health sector site in central London over a 7-month period. It also is experienced in maintaining high standards of hospital hygiene.

Admittedly, there isn’t even a broker note on the company but it is backed by two big funds, Helium Rising Stars (23.74%) and Octopus Investments (18.52).

Turnover for the year ended 30 September 2019 was £3.10m (2018: £3.30m) as unprofitable work was discontinued. Gross margins were 750-basis points higher at 28.5% (2018: 21.0%) and operating performance has materially improved to a loss of £183,000 (2018: loss of £1,951,000).

Investors should note that it is fairly illiquid, so that even slight buying/selling can move the price significantly.

At only 0.8p at the time of writing, React is definitely worth some deep research.

The writer holds stock in React.

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