ANALYSTS have been upbeat on Hai-O Enterprise Bhd’s future outlook after the Group posted stellar financial performance in the first quarter for the financial year ending 2020/21, as compared with previous years.
Hai-O’s 1QFY21 revenue rose 7.8% year-on-year to RM71.2 mil, underpinned by higher multi-level marketing (MLM) sales of RM49.3 mil, an increase of 17%.
During the Movement Control Order (MCO) period this year, Hai-O’s MLM segment was mainly spurred by higher contribution from e-commerce platform as more consumers shifted their buying habits from physical stores to online.
Change in consumer spending pattern, coupled with the company’s “Duit Raya” campaign and strong sales from its newly launched lady-wear items during the period, further boosted the MLM sector’s success, analysts noted.
Looking forward, JF Apex Securities in a research note on Tuesday (Oct 13) reckoned second quarter of financial year ending April 30, 2021 (2QFY21) to perform better, banking on better sales from the MLM segment amid easing impact from Covid-19 pandemic.
The research house’s optimism on the company’s performance is also backed by the management’s commitment to ensure continued growth.
According to an analyst note, acknowledging the change in consumer consumption pattern to adapt to the ‘new normal’, Hai-O, had enhanced its online platform to keep its business progressing.
JF Apex citing Hai-O’s statement said, the company’s ecommerce platform was not solely focused on sales transaction but was also being used as a platform for business operations and management.
The Group’s “free membership” offer and “Stay at home, Earn from home” campaign also contributed to the better performance of the MLM sector as it attracted more new members during the period.
On a positive note, the company, which offers a wide range of complementary medicines, medicated tonic as well as wellness, beauty and healthcare products and clinical services said, it aimed to reach 40% online transaction for its MLM segment in the immediate term.
“We believe Hai-O’s existing members are making ‘impact’ by introducing and sharing their products knowledge online and promoting through social media and even transacting through their online channel platforms,” JF Apex Securities said.
“We are lifting our earnings forecasts for the financial year ended April 30, 2020 and financial year ending April 30, 2021 by 98% and 46.3%% to RM41.4m and RM43.6m respectively, accounting for higher sales assumptions especially for the MLM segment.” it added.
Hai-O’s stronger earnings has prompted JF Apex Securities to upgrade its recommendation to “hold” from “sell” previously.
Sharing the same sentiments, Affin Hwang Capital in a June 30 note, has also upgraded its call on Hai-O to “hold” from “sell” previously.
“In light of the better-than-expected results, we are lifting our earnings estimates by 3-34% for the financial year ending April 30 2021-2023, largely to account for higher MLM sales and overall lower operating expenditure,” it said.
“Moving forward, focus for the group will be on enhancing digital marketing strategies across all segments, to capture opportunities amid the new normal.
“In the coming quarters, more marketing events are on the cards for MLM, such as local incentive trips to reward members; monthly flash sales; and free member fees campaign,” added Affin Hwang Capital.
On contrary, in the previous years, Hai-O’s net profit for the first financial quarter ended July 31, 2018 and July 31, 2019 reportedly declined on lower MLM contribution.
Meanwhile, Focus Malaysia in a May 14, 2014 article highlighted that Hai-O’s plan to reward shareholders with a special dividend payment in conjunction with its 40th anniversary and its share buy-back exercise had failed to spark investor interest in the counter and boost its share price.
Analysts attributed the lack of interest in Hai-O back then to weaker margins and lower sales as a result of rising operating costs and a weakening ringgit.
As at 9.20am today, Hai-O share price was at RM2.18 with 654.65 million market capitalisation. – Oct 15, 2020
