2015年2月12日星期四

WellCall - well you can call it a stock meeting all of Warren Buffett's investment criteria


Author: starstockmalaysia   |   Publish date: Mon, 19 Jan 02:13 

Stock Name: WELLCAL

Stock Code: 7231.KL



Financial Info

Date: 16 Jan 2015
Price : 1.72
Market Capital (RM): 570.463m
EPS (cent) : 8.86
P/E Ratio : 19.40
Par Value (RM) : 0.20
NTA (RM) : 0.260
Dividend (cent) : 11.300
Dividend Yield (%) : 6.57
Dividend Policy (%) : 50.0
Sector : Industrial Products


Technical analysis

1) Daily chart turning bullish with a surge rise of volume on Jan 8, 2015
2) Daily chart, having a cradle kind of formation and closed above E42 - bullish
3) Weekly MACD about to cross - bullish
4) RSI - oversold and start turning
5) If able to take out 1.74, we may see a movement up to 1.85 and after that retest previous high.

T1 1.74
T2 1.85
T3 1.91 11.05% upside (previous high)






Fundamental analysis


A recent presentation by Danny Chew, the executor director of WellCall mentioned that his company business is like Coca-Cola and Unilever. He also mentioned that WellCal fulfil all 7 criteria of a company that must have by Warren Buffet. This has sparked a huge interest for us to find out the potential of this company and here is our analysis

After 4 months of economic downturn in global market, Malaysia encountered a total losses of RM18.140 Trillion (Currency loss: RM1,07 Tillion and Crude oil loss: RM17.07 Trillion) now investors have switched their focus to export oriented company to park their fund. A good company target for the investors must fulfil the criteria of strong market presence, export oriented, highly exposed to foreign currency, sustainable growth in terms of revenue and PBIT and attractive dividend payout record.

WellCall is a leading player in industrial hose manufacturing industry. It is now Malaysia's largest exporter of industrial hoses to more than 60 countries across all continents, mostly to foreign distributors, which in turn supply to original equipment manufacturers. They produce six(6) major rubber hoses applicants, namely welding and gas, shipbuilding, automobile, air and water, food & beverage and oil and fuel.




Opportunity - Major catalyst


- Robust export to Russian, impact from the Russian-China piped gas project from 2015

  • There will be a huge demand from Russian-China project if materialise and will significantly contribute to Wellcal profit.
  •   When market down, lower raw material and project prices will expedite construction projects

Russia - China Gas Deal


- Lower raw material price for industrial hose products


  •   SMR 20 price tumbled more than 35% to average RM5.20/kg compared to past years and this will further enhance the profit margin and it will not before long to see the price will surge in relation to the increasing profit.
  •   Over production from Cambodia and Vietnam, expected to continue low price for the next 6 years based on rubber production vs demand analysis. This means WellCall will enjoy the low cost for a long period and will give shareholders a reoccurring underlying profit. 



Mondrian Fund have accumulated wellcall's shares through open market to 10% stakes
- WELLCALL board of directors has granted the right to allocate 1000 lot of WellCal share to PUBLIC MUTUAL at RM2 each 

  • This mean the minimum fair value at RM2 and we believe current price is a steal and still very much undervalued.





Strength

  • Export (91%) of total Revenue

  • Economic of scale, more than 100 customers with 60 key accounts worldwide

  • All order with upfront 50% payment

  • The core product - Mandrel hose has around 70% profit margins

  • Strong growth of profit margin over the last 4 years


Dividend payout




  • High utilization at Factory 2 since last year (85% above)

  • Aggressive plant expansion project to tag along with global demand.






Final Notes

The recent volatile market has caused many investor to shy away from stock market but at the same time they are in the dilemma because knowing putting money in fixed deposit savings will see their money depreciating because of extremely high inflation. Many experts has recommended to put money into stock that gives high dividend yield to overcome these worries but most of these stocks share price, hardly move like MayBank. We think WellCall give you best of both worlds offering a 6.57% dividend and a whopping ROE 34.69% . We believe a high ROE will turn to higher share price. We recommend both Short Term trading BUY and Long Term BUY due to its impressive ROE.



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Source : http://starstockmalaysia.blogspo ... -call-it-stock.html