Business & Markets 2013
Written by Lyana Shohaimay of theedgemalaysia.com
Tuesday, 29 October 2013 10:27
KUALA LUMPUR: Wellcall Holdings Bhd says its third factory, slated for completion in the first quarter (1Q) of 2015 will meet the market demand for its products over the next five years. Wellcall is one of the largest manufacturers of industrial rubber hoses in the country.
“We are currently in the process of finalising the factory layout and machinery,” said executive director Alex Chew Chee Chek during his session at the iCapital.biz Bhd Investor Day 2013 last Saturday.
The new factory will be built on a tract measuring about 3.3ha located 1km away from its current factory site in Lahat, Perak.
The company has also reclaimed land in the past few months to expand the total land area to approximately 3.5ha.
“This expansion is expected to increase the capacity of only the mandrel hose section ... by 100% in two stages and up to 70% of the total manufacturing capacity,” said Chew, adding that the company’s expansion has always been demand driven.
“Every time we expand, it is a meaningful expansion. We don’t want to end up with excess capacity that will put pressure on our pricing.”
Wellcall’s last expansion was in 2006, when its capacity more than doubled.
The company is looking at capital expenditure (capex) ranging from RM35 million to RM38 million in two stages for the third factory.
The bulk of the capex will be used in the first stage to invest in more sophisticated machines, mandrel machines with different specifications, targeting the North American mass market which the company intends to penetrate.
The expansion will see the company gear up, with 50% of the capex funded by short-term borrowings.
Wellcall has a dividend policy of 50% payout of its profit. For the 2012 financial year ended Dec 31 (FY12), the company paid out a 16 sen single-tier dividend per share (DPS), a 33.3% increase from the total payout of 12 sen in FY11.
The company has so far announced 13 sen DPS for the past three quarters.
The company manufactures two types of rubber hoses: mandrel and extrusion. Mandrel is the higher margin product. The company will focus on manufacturing mandrel hoses for three uses: air and water, welding and gas, and oil and fuel industries.
Wellcall closed on Bursa Malaysia yesterday at RM3.03.
This article first appeared in The Edge Financial Daily, on October 29, 2013.
Publish date: 29/10/13