Monday, March 5, 2012

Wellcall: Good CALL If you are into dividend...

If you are into this dividend thingy, then Wellcall is for you. This rubber hose manufacturer (something I can't foresee myself knowing a lot about) has outstanding dividends payment and manageable balance sheet numbers. They pay their dividend quarterly. Nice!

Let me highlight parts where it is so attractive.

First, look at its track record. Revenue and PAT growth are there except for 2 years (2009 and 2010) where economy in US and Europe were really tough. Note that economy for Europe is still in its doldrums but the company probably has adjusted itself and managed to find alternative markets. You will also notice until recently, rubber price was a major factor to pricing for companies which uses rubber as its raw material, Wellcall included. The high rubber prices in 2010 and 2011 caused Wellcall's margin to be squeezed (albeit not much). For any investors which invested into rubber gloves, you may want to divest some of those investments and hedge your risk with Wellcall as it may not be affected so much by pricing competition as seen in the rubber gloves industry. (Rubber gloves companies are also quite pricey now.)

Wellcall is a company controlled by Taiwanese. As you would have seen the same in Uchitec, their dividends are fantastic. They basically payout all their profits into dividend [note the Net EPS line and Net dividend line (in red) - do take note that par value is RM0.50]. This I believe is because of they can afford to do so and I believe Taiwanese would rather pay all their profits as dividends due to they rather take their money home (and not leave too much behind in Malaysia). Having said that, as I would show you later the balance sheet is still strong.

Price side? 10x PE with market capitalization of RM200 million and dividend yield is also around 10%. There are not many companies in the world which can consistently provide 10% dividend yield, I believe, and Wellcall has made that CALL. There are also not many companies which can provide consistent growth but yet give excellent dividend yield. So note this! (As I said earlier on business side of things I can't call myself good at understanding the rubber hose industry well - probably scratch my head quite a bit as not much can be found from Googling either)

Look at its Balance Sheet below though:

Notable highlights:

  • zero debt;
  • cash at around RM38 million - comfortable;
  • fantastic receivables - at RM5.6 million - now this is what you call careful business management as their cashflow management is strong (I believe this is due to nature of business which relies on LC terms as payment);
  • inventory management manageable level and sound.
Based on the above, Wellcall can continue to provide excellent dividends if their profit margin remains to be strong. So if you are into dividend, this is an attractive stock!

Serious Investing!

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