Wellcall Holdings Bhd

Wellcall Holdings is industrial rubber hose manufacturer which exports over 90% of its product over 60 countries worldwide. Company has been growing since 2004 and hit a peak in their turnover of RM119 mil FYE2008 before stuttering during the recent financial crisis which affected the world. FYE 2009 turnover was only 76% of its peak at RM79 mil. Main factors affecting their margins are costs of raw materials and the exchange rate to MYR as they export the majority of their products.

Financially, Wellcall Bhd. is doing well with no debts whatsoever and latest quarterly result shows it has a healthy RM37.9 mil in the bank and generates a steady cashflow every quarter which is uses to pay dividends to shareholders. They have a dividend policy of at least 50% payout of their EPS.

During the peak of their company's performance, the counter achieved a price of RM2.32 in early 2007 (after adjustment for bonus in 2008) and a low of RM0.80 in the beginning of 2009 during the height of the financial crisis post-quarterly results. The stock have recovered above RM1.00 and during 2010 reached a height of RM1.53 and a low of RM1.20. Currently it sits in the RM1.25-30 range with a 2.5 sen dividend going ex on 30th August 2010.

At the end of July 2010, Wellcall announced their main shareholder Lifewise Alliance Sdn Bhd which owns 31.11% of the company shares are winding up volunteeringly which prompted a query from Bursa regarding the impact on the shareholdings of the company. Wellcall has replied stating that shareholdings among the major holders are intact and no new shareholders or directors will emerge from the winding up of Lifewise and the winding up will take 8 - 12 months to complete. Lifewise Sdn Bhd is controlled by the 3 directors in Wellcall, it is not clear why they are winding up Lifewise which will distribute its shares back to them. By liquidating Lifewise, the 3 directors will probably own Wellcall directly though the the distribution ratio is unknown.

Mr Huang Sha which is the managing director and mentioned as the person regarded for the high growth of Wellcall over the years is Taiwanese and a PR in Malaysia whom also holds the highest shareholding in the company according to the last audited annual results. But his indirect shareholding is shared with 2 other directors.

The current prospect of will depend on FYE2010 4th quarter results which will paint a clearer picture where they are heading in terms of growth. MYR appreciation and the raw materials prices such as rubber can be a good indication of their margins. Post June 2010, their taxes would see an increase as their pioneer status tax incentive will expire though it might not be as significant.

Management has stated they are optimistic FYE2010 will be better than FYE2009. From the 3 quarters thus far their revenues, net profits and dividends have almost reached FYE2009 full year results. Although revenues have been steadily increasing every quarter so far, their net profits are not corresponding equally due to higher costs of manufacturing and strenghtening of the MYR.

Historical Dividends and EPS

2010 (3 quarters)
EPS = 8.44sens
Dividends = 8 sens

2009
EPS = 10.16 sens
Dividends = 11 sens (7 sens + 4 sens special)

2008
EPS = 13.33 sens
Dividends = 8.67 sens

2007
EPS = 12.07 sens
Dividends = 6.33 sens