My Stock - WELLCAL (7231)

How WELLCAL fulfils my stock selection criteria?
1) Annual Dividend Yield 10% based on my average price of RM1.20
2) Business has been growing up for past 3 years (from 2009 to 2011)
3) ROE > 10%
4) Wellcall has been debt free since its listing in 2006. As at end-June 2011, its balance sheet remained healthy with cash reserves of RM36.48 million.

I accumulated WELLCAL (7231) from Aug 2011 until Dec 2011 with average cost RM1.20 and i kept it till today.

WELLCAL is a very good fundamental company, it has a lot other plus points as below:
1) Dividend Policy 50%
2) Product for niche market (O&G, F&B, weld & mining and chemical)
3) Recurring business as the industrial hose average life span is around 6-12 months)

Back to 2011, the reason i bought WELLCAL is because of its business has been growing up well when i first noticed it in 2011. The revenue was growing strongly, but profit didn't grow at the same pace. As a serious investor, we should always try to find out the reason if there is something we are not sure. And, you will be rewarded at the end. I found out that the reason behind of it, it was because the rubber price has been going up drastically in 2011 and it caused the margin profit of WELLCAL dropped since the rubber is the main raw material of WELLCAL. The good news is, the rubber price was dropping when i decided to buy it. So, i am quite sure that the profit will be improved in near future if the revenue can be maintained.

My Investment Result

I gained more than 100% from initial capital, this is not included the dividend that i received over past few years. The most wonderful fact is that i'm receiving more than 13% dividend yield from WELLCAL this year. This is the beauty for being a real investor.

About Future
After completing the new plan in mid of 2014, there will be a 70% jump in its current production volume. So, i am expecting at least 50% improvement in the revenue & profit after the new plan commence. Below are the simple calculation to project its future prospect based on the latest quarter result (Q3 of 2013).

Current Quarterly Net Profit = RM6.8mil
New Quarterly Net Profit = RM6.8mil x 1.5 (50% jump in revenue & profit) = RM10.2mil
New Annually Net Profit = RM10.2 x 4 = RM40.8mil.

This is also equal to earning per share of RM0.30. With its dividend payout for past few years, there is a very good chance to get 25-30 cents dividend after commencing the new plan.