Wellcal- a good income stock

Results Update

For QE30/6/2013, Wellcal's net profit increased by 38% q-o-q or 10% y-o-y to RM6.8 million while its revenue was mixed- up 16% q-o-q but down 5% y-o-y - to RM35.5 million. The reason for the improvement results was lower cost of raw material (such as rubber) and favorable exchange rate movement. Like many manufacturers, Wellcal will benefit from the weakened MYR.


Table: Wellcal's last 8 quarterly results


Chart 1: Wellcal's last 24 quarterly results

Valuation

Wellcal (currently at RM2.81 as at 12.00pm) is trading at a PE of 16 times (based on last 4 quarters' EPS of 17 sen). The stock is trading near its fair value. However, Wellcal is a good income stock as it pays out nearly 100% of its earning as dividend. Thus the stock has an attractive dividend yield of 6.0%.

Technical outlook

Wellcal is still in an uptrend. It recently broke above its horizontal line at RM2.74. The target of the current move could be RM3.00.


Chart 2: Wellcal's daily chart as at Sep 9, 2013_11.50am (Source: Quickcharts)


Chart 3: Wellcal's monthly chart as at Sep 9, 2013_11.50am (Source: Quickcharts)

Conclusion

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 16 times. However, it is a good dividend stock as it has a dividend yield of 6%.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Wellcal.