Stock Name: HAIO
Company Name: HAI-O ENTERPRISE BHD
Company Name: HAI-O ENTERPRISE BHD
| Research House: OSK | Price Call: HOLD | Target Price: 1.99 |
Hai-O's 9MFY12results were in line with consensus but above our forecasts. Revenue and net profitincreased by 3% and 21.7% respectively on the back of better performance in theMLM division. EBIT margin improved from17.5% to 20.7%, thanks to better MLM sales and enhanced margins from thewholesale division. We raise our FY12 and FY13 estimates given the betterresults, which bump up our FV to RM1.99. Maintain NEUTRAL.
Stronger thanexpected. Hai-O's revenue and net profit came in stronger at RM170m andRM24.7m, registering a decent y-o-y growth of 3% and 21.7% respectively. The betterresults were largely underpinned by stronger performance at itsMLM division (revenue +4.9% y-o-y), coupled with lower R&D costs in thetechnology division. On q-oq basis, revenue stood at RM62.8m, 11.7% higherversus RM56.2m in the preceding quarter,while earnings improved from RM7.9m to RM9.1m (+15.2%).
MLM still the pillar.The MLM division's profit surged 18%, propelled by robust sales of its mainproducts as well as new products,coupled with effective incentive trip campaigns for its MLM members. We believethe growth momentum in the MLM division, which contributes 56.1% oftotal revenue, should be sustainable moving forward in view of the company's enhanced marketingstrategies and aggressive recruitment drive for members. The wholesaledivision's revenue trended lower by 8.5% but registered a PBT growth of 16% owingto its high margin products. The revenue and profit generated by the retaildivision were flattish as it rationalized its unprofitable outlets while at thesame time opened more new outlets.
EBIT margin expands. The company's EBIT margin widened 3.2% from 17.5% to 20.7%, mainly driven byhigher sales from the MLM division, better margins from wholesaleproducts, higher rental income and lower R&D costs in other divisions. MaintainNEUTRAL. We revise up our FY12 and FY13 forecasts by 6.2% and 7.1% respectivelyin light of the better reported results. Our FV is raised to RM1.99 as we roll overour valuation from FY12 to FY13 based on 12x PER. Maintain NEUTRAL given the limitedupside in the share price.
Source: OSK188
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