13 Reasons to Invest in Wellcall

I made this list based on an article about Wellcall in The Edge Malaysia yesterday.

13 Reasons to Invest in Wellcall:

1. It is the largest exporter of industrial rubber hoses in Malaysia

2. It is able to pass down the cost to customers if raw material prices (rubber) rises gradually

3. It has the flexibility to switch between natural and synthetic rubber

4. 98% of transactions are in US dollars (advantageous if the US dollar strengthens)

5. Its operations are capital intensive rather than labour intensive, with a workforce of only 400.

6. Its products are more for niche markets, especially in the oil and gas (O&G) sector. Other major application markets include automobile, ship building, mining and food and beverage (F&B).

7. It has no significant competitors in Malaysia due to high cost of equipment.

8. Its current production utilisation is reaching 80% and planning to expand.

9. It derives 90% of its revenue derived from foreign markets, i.e. Asia, Middle East, Europe, North America, Australia/New Zealand and South America. It is expanding its customer base in places such as Africa, Russia and Latin America.

10. 85% to 90% of its sales come from the replacement market because industrial hoses last up to eight months before they are replaced.

11. It does not hold stock of its products because production is based on a job order basis, thus preventing overcapacity and price dumping.

12. The market for industrial hoses has a growth of 4% to 5% a year.

13. High dividend yields and debt free

I like reasons No. 7, 8, 10, 13.

Main risks would be 4 and 9.

Its share in global market is only 0.4%.

Its website comes out in the first page of Google when I searched the term "industrial rubber hoses."

It would be a good buy if the global economy is expanding.