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WELLCAL (7231) : WELLCALL HOLDINGS BERHAD
KLSETrader
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01 Jan 2012, 09:21 PMPost #1
Just realized that this commpany is paying dividend for every quarter. Any one holding this stock now? What is your opinion? Thanks for sharing.
ILoveDividend
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02 Jan 2012, 05:34 AMPost #2
Just realized that this commpany is paying dividend for every quarter. Any one holding this stock no...KLSETrader @ 01 Jan 2012, 09:21 PM
I am holding this stock, but my entry price is a bit high around RM1.20. I have been receiving very nice dividend since i bought it. I like this stock because of its generous dividend payout. This company has almost distributed all of its net profit to shareholder for pass few years since they have a very healthy balance sheet with cash reserves of RM36mil. Also, this is the only glove company which is not affected much by the rubber price and USD currency. As you can see from its quarter report history table above, its profit is growing very consistently. Apart from that, its net profit start claiming up again after the rubber price was dropping this year. I am expecting it will come out a very good result for FY2012. Hope it can give around 15 cents dividend for FY2012 compared to 12 cents this year.
CNY2012
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02 Jan 2012, 10:51 AMPost #3
Here is the research from CIMB about WELLCAL:

Wellcall a viable option to rubber gloves

KUALA LUMPUR: With volatile rubber prices and the weakening US dollar, many companies in the rubber sector have seen lower profits since the beginning of last year. However, Wellcall Holdings Bhd, the largest exporter of industrial rubber hoses in Malaysia, is one of the few that bucked the trend with its latest quarterly report.

Wellcall posted a 38.34% year-on-year rise in net profit to RM4.86 million for 3QFY11 ended June 30 from RM3.51 million a year ago. Revenue increased by a larger margin of 50.8% to RM38.11 million from RM25.27 million previously. Basic earnings per share (EPS) for the quarter was 3.68 sen compared with 2.66 sen a year ago.

“The better quarterly results were also due to the improved utilisation of our production lines and the gradual increase in the selling price of our products,” Alex Chew, executive director of Wellcall, told The Edge Financial Daily in an interview.

He added that the increase in raw material prices gave Wellcall room to raise selling prices.

“Wellcall actually favours the upward increase in raw material prices, but it has to be a gradual and not a drastic increase. As long as we have a reasonable leeway to communicate with our customers, we are able to pass down the cost,” Chew said.

Like other manufacturers, Wellcall has been facing rising raw material costs, in particular synthetic rubber and standard Malaysian rubber (SMR). The price of SMR 10 has been on the rise from around RM9.50 per kg in January 2010, peaking at RM16.70 per kg in February 2011. This month, it averaged around RM13.65 per kg.

The stronger ringgit is another headwind as 98% of Wellcall’s transactions are done in US dollars, but it also reduces the cost of imported synthetic rubber and chemicals, Chew said.


Chew: It has always been our strategy to focus on high-value products. We also provide a one-stop procurement for our customers to mix their products in one container.
To counter the effects of rising raw material costs and the strengthening ringgit, Chew said that apart from pricing up its products, Wellcall has improved efficiency by transforming its manufacturing process.

“Wellcall has been improving its efficiency in the manufacturing process by converting older manual machines to semi-automated ones. This exercise is an ongoing programme to cut labour costs,” he said, adding that in certain divisions, Wellcall has managed to reduce the workforce by up to 40%.

To buffer against volatitile raw material prices, Wellcall purchases its materials in bulk. Chew said Wellcall has in stock one month’s worth of natural rubber and two to three months of synthetic rubber.

Wellcall also has the flexibility to switch between natural and synthetic rubber, giving it room to minimise raw material costs, he said.

Wellcall’s products are sold to distributors and end customers in major application markets. These include the air and water hose, welding and gas, oil and fuel, automobile, ship building, and the food and beverage (F&B) markets.

Unlike rubber glove companies that cater for the mass market, Wellcall produces more for the niche markets, especially in the oil and gas (O&G) sector.

“Wellcall’s products are tailor-made and meant for the niche segment. So it is easier to pass cost increases to customers,” Chew said.



“One reason we are able to sustain a high margin is that not many are able to produce hoses for the O&G sector,” Chew said.

Wellcall has been focusing on high-value products in the F&B, O&G and mining sectors, riding on the commodity trend and increased mining activities in gold, iron and oil, he elaborated.

“It has always been our strategy to focus on high-value products. In addition, we provide a one-stop procurement for our customers to mix their products in one container,” he said.

Chew said the specialised high value products in these sectors also have higher profit margins, and Wellcall will continue to focus its research and development (R&D) in these sectors.

Wellcall also has the advantage of investing in new equipment cheaply, he said.

“We save up to about eight times in cost compared to our peers, as we have our own proprietary design and we fabricate our own mandrel production lines. Our return on equity is just two to three years,” he said.

The high cost of equipment in this industry also acts as a barrier to entry which means Wellcall has no significant competitors in Malaysia.

With its current production utilisation reaching 80%, Chew said Wellcall is looking for suitable land near its present location in Ipoh for expansion.

With a workforce of 400 on a 5ha factory plot, Chew said Wellcall’s operations are not labour intensive, but capital intensive.

Wellcall uses two methods to manufacture its hoses. The extrusion method is used to produce hoses with a diameter of less than 6cm. For hoses exceeding 6cm in diameter, the mandrel method is used. Wellcall currently has 22 extrusion lines and 32 mandrel lines.

The production lines have an output capacity of up to 30,000 tonnes of rubber hoses a year if run on three shifts a day, and up to 22,000 tonnes on two shifts.

With 90% of its revenue derived from foreign markets, Wellcall exports to more than 60 countries. For the nine months ended June 30, 23.4% of sales were from Asia, followed by the Middle East (19.9%), Europe (16.3%), USA/Canada (14.9%), Australia/New Zealand (9.6%), South America (12.3%) and Africa (3.6%). Malaysia only contributed 8.3% of sales.

Chew said Wellcall is expanding its customer base in places such as Africa, Russia and Latin America.

It is worth noting that Wellcall’s revenue of RM99.6 million for 9MFY11 has already equalised its FY10 annual revenue of RM96.6 million. It is 45.6% higher than revenue from the same period last year.

Operational profit from its export and local markets increased by 33.78% and 19.04% respectively, from the same period last year.

Net profit for the nine-month period, however, was marginally lower at RM10.78 million, or 8.17 sen per share, down 2.7% from RM11.08 million a year earlier.

What makes Wellcall stand out from the rubber gloves companies is its high dividend yields.

According to a CIMB Research report on Aug 16, Wellcall’s dividend yield for CY11 was 13.9%, whereas the highest among the rubber glove companies was 5.1% from Hartalega Bhd.

Wellcall has been debt free since its listing in 2006. As at end-June 2011, its balance sheet remained healthy with cash reserves of RM36.48 million.

Industrial hoses last from five weeks to eight months before they are replaced. Because of this, 85% to 90% of Wellcall’s sales come from the replacement market, said Chew.

Because of the continuous demand for hoses in new and old machinery, one could say Wellcall enjoys a “compounding” demand for its products in the future.

Chew mentioned that Wellcall does not hold stock of its products because production is based on a job order basis. This prevents overcapacity and price dumping.

He said the market for industrial hoses has a growth of 4% to 5% a year. The outlook for the rubber hose industry is still positive with original equipment manufacturers (OEM) continuing to outsource their requirements.

With the recent quarterly results, Chew hopes to regain shareholder confidence.

CIMB expects Wellcall to post a net profit of RM15.2 million for FY11 ending September, before rising to RM19.2 million in FY12, with EPS of 11.5 sen and 14.5 sen respectively. At last Friday’s closing price of RM1.17, the stock would be trading at just eight times FY12 EPS.

Over the past five years, Wellcall’s net profit rose from RM10.88 million in FY06 to a high of RM17.11 million in FY08, before declining to RM13.34 million in FY09 and then rising to RM14.62 million in FY10.

CIMB expects gross dividends of 15.2 sen for FY11 and 17.4 sen for FY12. This translates into dividend yields of 12.9% and 14.8% respectively.

Over the last year, Wellcall’s shares have traded between a high of RM1.33 and a low of RM1.04. Its net assets per share stood at 59 sen as at June 30. The company had a market capitalisation of RM154.86 million as at last Friday.

With rubber glove companies facing challenges such as intense competition and overcapacity, investors looking for exposure to the rubber sector would do well to to look at Wellcall, with high dividends to boot.

http://www.theedgemalaysia.com/in-the-financial-daily/191741-wellcall-a-viable-option-to-rubber-gloves.html
gen_hwang
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05 Jan 2012, 02:16 PMPost #4
It is in my watchlist as a dividend play. Niche industry.

While it is the only company not affected by rubber price, my concern is that they pay out 100% profit to shareholders instead of retaining cash as working capital and for expansion.

ILoveDividend
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05 Jan 2012, 02:20 PMPost #5
It is in my watchlist as a dividend play. Niche industry.

While it is the only company not a...gen_hwang @ 05 Jan 2012, 02:16 PM

Hi gen_hwang,

I think paying 100% is still ok for Wellcal as they are holding Rm36mil cash now. Should be enough for any expansion plan. I am optimize to thier future since the revenue is at the historical record now. We should be able receive more dividend this year. Are you holding any?
gen_hwang
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05 Jan 2012, 02:23 PMPost #6

Hi gen_hwang,

I think paying 100% is still ok for Wellcal as they are holding Rm36mil cas...ILoveDividend @ 05 Jan 2012, 02:20 PM


No i did not own any for the moment. I favour Zhulian over Wellcall for the time being. May consider if the price corrects.
ILoveDividend
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05 Jan 2012, 02:27 PMPost #7


No i did not own any for the moment. I favour Zhulian over Wellcall for the time being. May ...gen_hwang @ 05 Jan 2012, 02:23 PM

Ic. Too bad Zhulian cannot give 10% dividend yield now, otherwise i will consider it also. My Rule#1 is to have at least 10% DY before i invest in a counter.
ILoveDividend
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06 Jan 2012, 02:09 PMPost #8
Wellcal is moving up slowly and silently now...hehe
CNY2012
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12 Jan 2012, 09:31 AMPost #9
Wellcal is good for long term, expected better result ahead.
Good time to accumulate now before too late. drool
gen_hwang
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12 Jan 2012, 09:53 AMPost #10
Of course, it's a good company, but its latest quarter result will include Oct-Dec 2011. I will be interested to see how she weathered that period of negative growth, as well as next quarter when time lag effect sets in.
ILoveDividend
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12 Jan 2012, 10:00 AMPost #11
Of course, it's a good company, but its latest quarter result will include Oct-Dec 2011. I will be i...gen_hwang @ 12 Jan 2012, 09:53 AM

Mine to share what do you mean by negative growth? I think they are doing pretty good job. I am expecting a good set of result for next quarter as the latex price was dropping few months ago. I am expecting its EPS to hit 4 cents for the Q1 of FY2012. Any opinion? notworthy
gen_hwang
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12 Jan 2012, 10:01 AMPost #12
I am looking in terms of new order growth. Haha.
ILoveDividend
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12 Jan 2012, 10:08 AMPost #13
I am looking in terms of new order growth. Haha.gen_hwang @ 12 Jan 2012, 10:01 AM
mmm.. I have checked their annual report before, their order in europe country has been recovering since last year, and the order from africa & asia country is growing also.

Let's see what will be the result for next quarter. smile
Anyway, thanks for sharing. notworthy
ILoveDividend
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12 Jan 2012, 03:49 PMPost #14
Just read again the annual report for wellcal for past few year.
Let's see the tables below for the wellcal's revenue breakdown by Geographical Segments:

Revenue for 2008 breakdown by Geographical Segments:
Forum | MalaysiaStock.Biz

Revenue for 2009 breakdown by Geographical Segments:
Forum | MalaysiaStock.Biz

Revenue for 2010 breakdown by Geographical Segments:
Forum | MalaysiaStock.Biz

As we can see from the tables above, wellcal's business was hit by the crisis 2008 and this cause its revenue to drop sharply from RM119mil (2008) to RM79mil (2009).

But how about 2010? Its revenue has recovered to RM96mil. If we zoom in to the Geographical Segments details, we can see that basically all the segments have a clear improvement/recovering and the only exception is the Europe which still maintain at RM14mil. The plus point is the improvement in USA, ASIA and South America. South American is their new segment if not mistaken.

How about last year 2011? Let see from its quarter report history above, it has total revenue of RM136mil which is also its historical high for revenue.

Now, lets see its 5 years reports as below:
Forum | MalaysiaStock.Biz

Once again, FY2011 achieved the historical high for the profit before tax which is RM22mil if compare to its previous high of RM17mil for year 2008 (just before the crisis).

So, based on the study above, it is clear to see that Wellcal has make a come back and we should expect better result ahead. This is not factor in the rubber price dropping since last few months.

Hope this study can benefit all members here...shy

This is not a buy call..Just a sharingsmile
Jacky
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14 Jan 2012, 12:21 PMPost #15
Thanks for sharing ILoveDividend.Very good info. thumbup
gen_hwang
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16 Jan 2012, 07:57 PMPost #16
Thanks for sharing. But Wellcall's pretty quiet now.
ILoveDividend
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16 Jan 2012, 08:06 PMPost #17
Thanks for sharing. But Wellcall's pretty quiet now.gen_hwang @ 16 Jan 2012, 07:57 PM

Just a matter of time for WELLCAL to move higher.
Able to accumulate more @ RM1.28 today after queuing for few days. rolleyes
Destiny
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19 Jan 2012, 09:35 PMPost #18


Just a matter of time for WELLCAL to move higher.
Able to accumulate more @ RM1.28 today...ILoveDividend @ 16 Jan 2012, 08:06 PM

Hai brot....dunno if can buy now ...question
ILoveDividend
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19 Jan 2012, 09:56 PMPost #19

Hai brot....dunno if can buy now ......Destiny @ 19 Jan 2012, 09:35 PM


Hi Destiny,

Wellcal is at consolidation stage now, most probably only will move higher when its next quarter report release in end of Feb. But it may be too late if you buy it after the report being released. If you dun mind to wait, i think now is a pretty good timing to accumulate it.

Its next quarter should be good one as the rubber price was dropping and USD was strengthen against ringgit.

gen_hwang
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19 Jan 2012, 09:59 PMPost #20


Hi Destiny,

Wellcal is at consolidation stage now, most probably only will move highe...ILoveDividend @ 19 Jan 2012, 09:56 PM


if you are an investor, not a speculator looking for fast profit, this is a pretty good one, as per ILoveDividend's analysis.

yeah doh drool lol mad notworthy question rant rolleyes sad shutup shy smile star sweat thumbup wub cry


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