WellCall

A World Class Hose Manufacturer

Publish date: Wed, 23 Jul 2014, 11:33 AM 

---

1. Introduction WellCall was established in 1996 and is located at Ipoh, the state of Perak in Malaysia.  It has expertise in manufacturing a wide range of industrial rubber hoses that cater to various applications markets such as industrial and construction site, mining, automobile, petroleum, oil and gas, sea / land transportation, food and beverage, shipyard et cetera. WellCall is a global and the largest industry rubber hose manufacturer in Malaysia.

To date, WellCall has a workforce of 350 staff. WellCall has expanded its existing factory space from 150,000 sq. ft to 320,000 sq. ft, encompassing a total land area of approximately 504,570 sq. ft.

The company's products are as follows :-




        


  

   

2. Historical Share Price

3. Basic Financial Information

Based on 332 mil shares outstanding and share price of RM1.58, the company has market cap of RM525 mil.

Based on latest net profit of RM28.8 mil, PE multiple is 18 times.

The group has strong balance sheets. As at 31 March 2014, the group has net assets of RM84.2 mil, zero borrowings and RM46 mil cash. Cash per share of 14 sen.

Up to 90% of the group's products are exported (10% Malaysia, 21% Asia, 15% Middle East, 15.7% Europe, 13% North America, 11% South America, 10% OZ & NZ) 

4. Historical Profitability

The group has been consistently profitable for many years and has been paying out good dividends :-

FYE Sept	2006	2007	2008	2009	2010	2011	2012	2013	2014E
Revenue	67.4	91.4	119.1	79	96.6	136.8	154.2	131.5	138.5
Net profit	5.8	15.2	17.1	13.3	14.6	15.3	23.3	24.7	28.4
Net margin (%)	8.6	16.6	14.4	16.8	15.1	11.2	15.1	18.8	20.5
EPS (Sen)	17.3	12.1	13.3	10.3	11.1	11.6	17.6	18.6	8.6
DPS (sen)	3.7	6.3	8.7	11.0	11.0	12.0	16.0	18.0	n/a
payout ratio (%)	21.1	52.3	65.4	106.8	99.1	103.4	90.9	96.8	n/a
Div yield (%)	1.86	2.69	7.47	9.65	8.59	10.71	7.21	6.36	n/a

5. Major Shareholders

Mostly Malaysians with a Taiwanese shareholder holding few million shares.



6. Factors That Affect Profitability

(a) Raw material cost - synthetic rubber and standard Malaysian rubber, 

(b) Exchange rate - strong US Dollars augurs well for the company, and

(c) Labour cost - minimum wage policy (mitigated by automation). 

7. Acquisition of Land

In November 2013, the group completed acquisition of 8 acres of land in Daerah Batu Gajah for RM6 mil. The land is to be used for expansion of factory. 




8. Concluding Remarks


It is clear that WellCall is a world class player. It exports 90% of its products all over the world.


The group consistently reported strong profit and paid out good dividends. As a result of its superb performance, it is currently trading at PE multiples of 18 times. However, this is backed by high dividend yield of 6.4%.


According to the company's website, the group has just expanded its manufacturing space from 150,000 sq ft to 320,000 sq ft. This is a very sigificant and positive development as industrial companies usually don't expand their production facilities unless they have a positive view of the industry's prospects and are expecting demand to pick up going forward. 


Definitely a stock that you should keep in your watchlist for opportuity to buy on weakness.