Tuesday, May 29, 2012

Wellcal chalked up another good quarter

Results Update

Wellcal has just its results for QE31/3/2012. Its net profit dropped 3.5% q-o-q but rose 90% y-o-y to RM5.5 million while its revenue declined 9.7% q-o-q but rose 15.5% y-o-y to RM37 million. The drop in net profit q-o-q basis was partly due to a one-off bonus payment of RM635k during the quarter. If that is excluded, net profit remained unchanged despite the 9.7% q-o-q decline in revenue. The reason for this is the company enjoyed better sales mix, with higher sale of mandrel rubber hose, which has higher profit margin than extruded rubber hose.

Table: Wellcal's last 8 quarterly results

Chart 1: Wellcal's last 14 quarterly results


Wellcal (currently at RM1.83) is trading at a PE of 11.4 times (based on last 4 quarters' EPS of 16 sen). The stock is trading near its fair value. Wellcal's management pays out nearly 100% of its earning as dividend. Thus the stock has an attractive dividend yield of 8.2%.

Technical outlook

Wellcal is still in an uptrend. The 10-week SMA line, which provides a good support for this stock, is currently at RM1.67.

Chart 2: Wellcal's weekly chart as at May 28, 2012 (Source: Tradesignum)


Based on good financial performance and still-positive technical outlook, Wellcal remained a good stock for long-term investment. Its upside potential may be limited as it is trading at a PE of 11.4 times. However, it is a good dividend stock as it has a dividend yield of 8.2%.

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