• Overview. Wellcall Holdings Berhad (Wellcall) 4QFY22 net profit was down  by 29.8% QoQ and 24.7 YoY amid a marginal decline in revenue which eased 0.4% QoQ and 1.2% YoY. The disappointing performance was dented by the  rescheduling delivery of shipment from certain customers coupled with  impairment in associate company. Full year net profit also slipped or by 2.8%  YoY despite soaring revenue which jumped 12.5% YoY no thanks to margin  pressure from higher freight and raw material costs.

• Key highlights. FY22 exports sales grew by 10.3% YoY following massive  rubber hose demand from major markets such as Africa (+41.3% YoY),  USA/Canada (+29.5% YoY), Australia/New Zealand (+14.2% YoY), Europe  (+7.7% YoY) and South America (+4.2% YoY) on top of encouraging sales  demand from local market (+38.8% YoY). Overall, FY22 local contribution  improved slightly during this financial year as exports market contributed  90.4% share compared to 92.2% during FY21.

• Against estimates: Inline. FY22 PATAMI of RM33.2mn was in line with our  and consensus’ estimates, making up 100.3% and 96% of full-year forecast.

• Dividend. The Group declared a fourth interim DPS of 1.6 sen. On top of that,  Wellcall also announced a special dividend of 1 sen, pushing total FY22 DPS to 7sen (vs FY21:7 sen). This translates into a 5.8% dividend yield.

• Outlook. We are optimistic on Wellcall outlook given its comfortable market  share in the industrial rubber hose industry. This will be topped by its zero-inventory business model which will keep its costs under control. Despite  global headwinds such as COVID-19 lockdown measures in China, on-going  Russia-Ukraine crisis as well as the risk of stagflation, the Group is optimist  on its operating costs and market share where this will be achieved through  a close monitoring especially on supply and demand imbalance. The Group  will also produce measures to offset the high freight and raw material costs.

• Earnings revision. No change to our FY23F-FY24F earnings forecast.

• Our call. Maintain a BUY call on the stock with an unchanged target price of  RM1.41. Our valuation is based on average 3-year high PER of 19.3x that is  pegged to FY23f EPS of 7.3sen. Our favourable view on the stocks is driven by its healthy margin growth, favourable cash position, and attractive dividend  yield.

Source: BIMB Securities Research - 1 Dec 2022