WELLCAL – Fundamental Analysis (6 Apr 2015)

WELLCAL Analysis:-

Excel – http://1drv.ms/1RLjXog

Notes – http://tinyurl.com/pjw2mrn

My View:-

  • Valuation:
    • 5-Y DCF:
      • Good Scenario: 2.02 (Fair value uncertainty: MEDIUM)
      • Base Scenario: 1.78 (Fair value uncertainty: HIGH)
      • Bad Scenario: 1.57 (Fair value uncertainty: VERY HIGH)
      • Ugly Scenario: 1.38 (Fair value uncertainty: EXTREME)
      • At current price (1.82), based on RDCF, assumption of FCFF growth rate in the next 5 years is 18.7%.
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.089) – Fair value 1.3 (Fair Value Uncertainty: EXTREME)
        • R4Q (EPS: 0.105) – Fair value 1.54 (Fair Value Uncertainty: VERY HIGH)
      • Forward:
        • FY15 (EPS: 0.12) – Fair value 1.75 (Fair Value Uncertainty: HIGH)
        • FY16 (EPS: 0.13) – Fair value 1.9 (Fair Value Uncertainty: HIGH)
      • EPS applied to reach the current stock price (1.82): 0.125
  • WELLCAL’s valuation is not attractive
  • WELLCAL’s new factory will be commenced for commercial production by Aug/Sep 2015. With the new factory, group mandrel hose production capacity will rise by 50% to 38,000 tonnes annually. If history is an indication, it could take the company 2-3 years to fill the new plant’s capacity.
  • WELLCAL is a very good dividend stock where its dividend yield (based on FY14) is 7.7%. On the other hand, to sustain its dividend payments (27 Feb 2015), the company might need to borrow in the short-term to fund the estimated RM40m capex for its new plant.

Latest Financial – Q2 2015 Financial Report (28 May 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4755213

At the time of writing, I did not own shares of WELLCAL.

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