Stock Name: HAIO
Company Name: HAI-O ENTERPRISE BHD
Company Name: HAI-O ENTERPRISE BHD
| Research House: OSK | Price Call: HOLD | Target Price: 2.03 |
We recently visited Hai-O, which seems to be slowlyregaining its earnings momentum. Its strategy of focusing on repeat consumerproducts instead of bigticket items is working as the MLM division is showingimprovement. We believe Hai-O would be able to deliver decent results given: i)the recent collaboration with KAEAM Corp on the global distributorship ofbamboo salt, and ii) its bird's nest export business. Maintain NEUTRAL, with FVof RM2.03.
The worst may beover. Hai-O managed to improve on its revenue and earnings in the last twoquarters after eight consecutive quarters of dismal performance, whichindicates that the company might be on the road to recovery. The coreMLM business bounced back with a decent 4.9% y-o-y revenue growth last quarter. Going forward, the managementis confident that Hai-O will be able to deliver satisfactory results.
MLM bounces back. The MLM division hasaround 140k registered members and is adding 2.5k new members monthly. The number of new members has risen steadily from 2k/month to 2.5k/month y-o-y, with management now aimingfor new additions of 3k/month in the near term. Learning from the past, the company has shifted its focus from big-ticket items such as water filters toconsumer-centric products such as beauty and health products, for which sales are consistent and are repeated. We believe the growth momentum in the MLM division issustainable given the company's improved marketing strategy and more balanced product mix. Meanwhile, its Indonesia MLM operation is still relatively small and not making much progress dueto fierce competition and strict regulations. Hai-O is trying to penetrate therelatively untapped 2nd tier cities such as Batam, Medan and PekanBaru for new markets.
Bamboo salt the new star. In early April, Hai-O Marketing signed aglobal distributorship agreement with South Korea's KAEAM Food Corp, the pioneer manufacturer of 'bamboo salt' (garambuloh). Hai-O brought in KAEAM bamboosalt three years ago via an exclusive collaboration, which proved to be timelybecause this product is gaining a strong following, which allows the company to expand into new markets. Elsewhere, Hai-O's new subsidiary ' Yan Ou Holdings SB (YanOu) ' will be sourcing for and processing, trading and distributing bird'snest. Once it obtains the licence toexport bird's nest, this will represent another good revenuestream for the company since the consumption of the product in Asia, especiallyChina, is huge.
Maintain NEUTRAL.Assuming stronger sales for the MLM division, we are marginally revisingupwards our FY13 forecast by 1.7%. Maintain NEUTRAL, with a higher FV of RM2.03,based on 12x FY13 EPS.
Source: OSK188
No comments:
Post a Comment