If you know where it's going
it's not worth doing !
Wellcall Holding Berhad, bursa quote: WELLCAL, is a holding company of Wellcall Hose (M) Sdn Bhd, which in turn is a manufacturer of tailored-made industry rubber hose, including water hose, air hose, petroleum hose and food hose.
Wellcall products are exported to more than 60 countries around the world, and widely used across different industry, namely automobile, food and beverage, oil and gas, construction, shipyard and mining sector.
Wellcall is very much focusing on its core business - manufacturing of premium, high quality rubber hose with superior margin, as opposed to low-tech hose like garden hose with relatively thin margin.
Alex Chew - CEO of Wellcall, spoke in a workshop during Investor Day 2013. Among the key takeaways are:
Produce upon order, all goods are produced and delivered to clients per order basic. No stock keeping.
A minimum 50% cash deposit is required before production starts
Wellcall has a short inventory turnover cycle. Depending on the volume of the order, it normally takes 3 - 6 months to complete a transaction, that is, from accepting order to delivery, and receiving payments.
Operating in a replacement market, rubber hose produced by Wellcall has a typical lifespan ranging from 6 to 9 months. This ensures a recurring business model as clients need to replace the hose before it wears out. According to Alex, replacement orders make up 90% of the sales.
The company is committed to R&D and cost control via automation.
Wellcall has an in-house R&D team who continuously bring in new innovation and product improvement through vigorous research and testing.
Through automation, it has successfully transformed itself from a labor intensive to cost effective manufacturer.
Expansion is planned for the next 4 - 5 years when there is clear earning visibility. Average break-even period for new plants is 1.5 years.
Prudent capex management and conservative business expansion have contributed to a healthy balance sheet, and put the company in a net cash position, hence Wellcall is able to return the excessive cash to its shareholder.
Wellcall has a dividend policy of distributing at least 50% of its profit to shareholders. Over times, it has surpassed this target by a considerable margin.
For 4 years running (FY 2009 – 2012), Wellcall has registered dividend payout of approximately 100%, an impressive records it hopes to uphold for the years to come.
The latest dividend announced in Aug 2013 was upped from 4 Sen in the previous quarter to 5 Sen. Therefore, 2013 could be another years of record dividend.
Unique products lineup, strong management team, staying focus in core business, are all the positive traits of Wellcall Holdings Berhad.
Mandatory deposit upon order and a quick cash conversion cycle have contributed to the strong cash flow of the company.
The greatest winning formula is nonetheless: the relentless commitment towards product innovation and improvement, as well as continuous investment in automation and cost control measures.
In conclusion, Wellcall is unquestionably a long term candidate for value investors seeking passive income and decent capital growth.
The crew at BFM 89.9 interviewed Alex Chew, covering topics on new products, future prospects, expansion plan, and dividend policy.