Stock Name: WELLCAL
Company Name: WELLCALL HOLDINGS BHD
Research House: INTER PACIFIC
Wellcall Holdings Bhd
(Aug 16, RM1.28)
Maintain neutral at RM1.30 with target price of RM1.30: We maintain our neutral recommendation with our target price at RM1.30 based on PER of 11 times and EPS of 12 sen. We believe the uncertain global economic prospects will put pressure on the company as 91% of its revenue is derived from the foreign market.
In addition, we reckon there could be negative impact margins due to the strengthening of the ringgit and escalating prices of certain locally sourced raw materials, particularly if these costs cannot be fully passed on to the customers if there is a two-to-three-month time lag.
3QFY2010 revenue rose by 10.8% quarter-on-quarter (q-o-q) to RM25.27 million. The recovery in demand for industrial rubber hose was sustainable, mainly supported by strong growth in revenue contributions from Europe and South America which grew by 49.4% and 45.7% respectively. Middle East and Australia/New Zealand are the overseas markets which registered negative growth at 7.9% and 7.7% respectively.
3QFY2010 profit before tax (PBT) increased by RM570,000 or 6.8% q-o-q to RM4.02 million. The increase in PBT was due to the one-off bonus payout to employees and foreign worker levy expenses amounting to approximately RM500,000 and RM234,000 respectively, incurred in the 2QFY2009.
The net profit margin dropped by 0.2% q-o-q to RM13.8 million despite revenue growth by 10.7%. We believe the drop was due to: (i) Gross margin was hurt by the strengthening ringgit against the US dollar as 91% of revenue contribution comes from exports; and (ii) Higher raw material costs compared with the preceding quarter. ' Inter-Pacific Research, Aug 16
This article appeared in The Edge Financial Daily, August 17, 2010.
Company Name: WELLCALL HOLDINGS BHD
Research House: INTER PACIFIC
Wellcall Holdings Bhd
(Aug 16, RM1.28)
Maintain neutral at RM1.30 with target price of RM1.30: We maintain our neutral recommendation with our target price at RM1.30 based on PER of 11 times and EPS of 12 sen. We believe the uncertain global economic prospects will put pressure on the company as 91% of its revenue is derived from the foreign market.
In addition, we reckon there could be negative impact margins due to the strengthening of the ringgit and escalating prices of certain locally sourced raw materials, particularly if these costs cannot be fully passed on to the customers if there is a two-to-three-month time lag.
3QFY2010 revenue rose by 10.8% quarter-on-quarter (q-o-q) to RM25.27 million. The recovery in demand for industrial rubber hose was sustainable, mainly supported by strong growth in revenue contributions from Europe and South America which grew by 49.4% and 45.7% respectively. Middle East and Australia/New Zealand are the overseas markets which registered negative growth at 7.9% and 7.7% respectively.
3QFY2010 profit before tax (PBT) increased by RM570,000 or 6.8% q-o-q to RM4.02 million. The increase in PBT was due to the one-off bonus payout to employees and foreign worker levy expenses amounting to approximately RM500,000 and RM234,000 respectively, incurred in the 2QFY2009.
The net profit margin dropped by 0.2% q-o-q to RM13.8 million despite revenue growth by 10.7%. We believe the drop was due to: (i) Gross margin was hurt by the strengthening ringgit against the US dollar as 91% of revenue contribution comes from exports; and (ii) Higher raw material costs compared with the preceding quarter. ' Inter-Pacific Research, Aug 16
This article appeared in The Edge Financial Daily, August 17, 2010.
No comments:
Post a Comment