This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

Investors who put their money in Wellcall Holdings Bhd (KL:WELLCAL) would be pleased with the group’s efficient use of funds to achieve steady growth and handsome returns over the last three years amid rising inflation, foreign currency fluctuations, market-related issues and supply chain disruptions.

The Perak-based industrial hose manufacturer recorded a whopping weighted return on equity of 34.3% over the three years from FY2021 to FY2023 — following the 27.54% it recorded in FY2021, 26.45% in FY2022 and 41.8% in FY2023 — which made it The Edge Malaysia Centurion Club Corporate Awards 2024’s winner of the Highest Return on Equity over Three Years in the industrial products & services sector.

The Perak-based industrial hose manufacturer chalked up a net profit of RM55.3 million for the year ended Sept 30, 2023 (FY2023), a strong increase from RM33.3 million in FY2022, which is little changed from RM34.2 million in FY2021. It made  RM29.4 million in FY2020. The impressive net earnings growth was due to robust revenue. Its top line grew from RM134.9 million in FY2020 to RM157 million in FY2021, then to RM178.7 million in FY2022 and hit RM217.2 million in FY2023.

With the steady rise in earnings, dividend per share climbed in tandem, from 4.95 per share in 2020 to 7 sen in 2021 and 2022, and further to 8.2 sen in 2023. Bloomberg data shows that the company, whose dividend payout ratio was 72% in FY2023, offered a 12-month dividend yield of 4.58% and that its indicated dividend yield is 4%.

At the time of writing in early July, the counter was hovering around RM1.64. In its FY2023 annual report, Wellcall, in explaining its excellent performance, says: “Despite the challenges, the group persevered by finding innovative ways to manage its businesses. This included improving operational efficiencies through product development, technology enhancements, automation and investing in our employees.

“The export and local market contributed approximately 92% and 8% respectively to the group’s annual revenue. The export market experienced a 25% increase, while the local market maintained consistent revenue compared to the preceding financial year. This revenue growth was primarily driven by continuous orders from the industrial rubber hoses market.”

Having been in a net cash position since its initial public offering in July 2006 and remaining debt-free since FY2018, Wellcall’s net cash position stood at RM74.4 million at end September 2023, up 11.5% from RM62.8 million a year ago.

The Main Market-listed group’s journey began in 1995, when its managing director Huang Sha established Wellcall Hose (M) Sdn Bhd to venture into the industrial rubber hose industry. Huang is a 68-year-old Taiwanese national and Malaysian permanent resident who was appointed to the board in April 2006.

The group currently specialises in manufacturing and export of light and medium rubber hoses. It also has an extensive product line. Its extrusion, mandrel and spiral hoses are sold in a broad range of markets, including air and water, bulk material, welding, chemical, food grade, marine and automotive. Besides serving local customers, the group exports its products to more than 70 countries, according to its website.

Wellcall’s export markets include the US, Canada, Asia, the Middle East, Europe, Australia, New Zealand, South America and Africa. In FY2023, revenue from exports grew 25% year on year and contributed 92% to group revenue, driven by strong global market demand.

According to Huang, Wellcall has a healthy order book, with two to three months’ sales covered and growing orders from customers.

“Around 80% of our demand comes from recurring orders from the replacement market, as rubber hoses generally last only three to 12 months, depending on the utilisation environment,” he explains.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.