Wellcall Q3 2019 Review

The latest Qtr report Q3, 2019 has reported a steady growth performance on EPS despite a slightly drop on its revenue. 9 months cumulative EPS for FY19 has achieved 82% of my forecast EPS (6.57sen).

   

Despite this current quarter revenue has reduced by 3% compated to same quarter preceding year, the group has recorded a better PBT mainly due to lower cost of production resulted from cost optimization of raw materials costs.

The export market and local market contributed approximately 90% and 10% respectively to the Group's revenue. The slight decrease in revenue mainly due to the volatility of global economic
sentiment which had affected the demand for industrial rubber hose market.

Overall, revenue has slightly increased which contributed from overseas businesses that has cushioned the decrease in rubber hose demand in the local market. The improvement in revenue were mainly fairly benefited from the increase in selling price and volume for some hoses.

Compare to previous quarter, the revenue remains stable. While PBT has improved by 16% which I believe that the contribution from lower crude oil price recorded during this quarter.

  Crude oil price has reduced by 20% from one year earlier, I reckon that the group raw material costs should have been reduced as they are mainly affected the price. If we cross check with its quarter report performance, the PBT is in line with the finding.  

The coming quarter Q4 FY19, I will see an improvement in the group's gross margin and PBT performance as it is still enjoying with low material costs amid the uncertainty of global economy and the conflict between two main economic bodies. 

Assuming that the coming Q4 business will be remained stable as Q3 FY19 and Q4 FY18, I reckon a fair value of 1.94sen EPS and a cumulative EPS of 7.37sen could be achieved. 

With the PE of 17, the expected target price of RM1.25 is given, a potential gain of 6.8% for the current market price.  

Technical analysis:

Although the price has recently break through the major bearish trend, the upward momentum has faded away and remained in side way trend. The price is still below MA 50 and 200 trend which can be acted as the stock resistance trend. Dividend will be paid out soon, price will be readjusted. No buying sign at the moment.