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Wednesday, November 29, 2017

Wellcal: Earnings Approaching Recent Peaks

Results Update

For QE30/9/2017, Wellcal's net profit increased by 22% q-o-q & 26% y-o-y to RM9.9 million while revenue rose 12% q-o-q & 35% y-o-y to RM44 million. Revenue rose q-o-q due to improved global demand for industrial rubber hoses. Profits rose q-o-q mainly due to continuous improvement in sales.


Table: Wellcal's last 8 quarterly results


Graph: Wellcal's last 41 quarterly results

Financial Position

As at 30/9/2017, Wellcal's financial position is deemed satisfactory with current ratio at 4.45x and gearing ratio at 0.25x.

Technical Outlook

Wellcal is in a long-term uptrend line with support at RM1.30. However its upside is capped by an intermediate downtrend line at RM1.45-1.47. As the share price has been pressing against this downtrend line, we await a convincing breakout that may lead to the continuation of the long-term uptrend.


Chart: Wellcal's weekly chart as at Nov 28, 2017 (Source: Malaysiastock.biz)

Valuation

Wellcal (closed at RM1.46 yesterday) is trading at a PE of 19 times (based on last 4 quarters' EPS of 7.6 sen). The stock is trading near its fully value.

Conclusion

Based on good financial performance and position, Wellcal is considered a good stock for long-term investment. However its upside is limited due to high valuation and technical resistance.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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