Hai-O’s 9MFY12
results were in line with consensus but above our forecasts. Revenue and net profit
increased by 3% and 21.7% respectively on the back of better performance in the
MLM division. EBIT margin improved from
17.5% to 20.7%, thanks to better MLM sales and enhanced margins from the
wholesale division. We raise our FY12 and FY13 estimates given the better
results, which bump up our FV to RM1.99. Maintain NEUTRAL.
Stronger than
expected. Hai-O’s revenue and net profit came in stronger at RM170m and
RM24.7m, registering a decent y-o-y growth of 3% and 21.7% respectively. The better
results were largely underpinned by stronger performance at its
MLM division (revenue +4.9% y-o-y), coupled with lower R&D costs in the
technology division. On q-oq basis, revenue
stood at RM62.8m, 11.7% higher
versus 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 main
products as well as new products,
coupled with effective incentive trip campaigns for its MLM members. We believe
the growth momentum in the MLM division, which contributes 56.1% of
total revenue, should be sustainable
moving forward in view of the
company’s enhanced marketing
strategies and aggressive recruitment drive for members. The wholesale
division’s revenue trended lower by 8.5% but registered a PBT growth of 16% owing
to its high margin products. The revenue and profit generated by the retail
division were flattish as it rationalized its unprofitable outlets while at the
same time opened more new outlets.
EBIT margin expands. The
company’s EBIT margin widened 3.2% from 17.5% to 20.7%, mainly driven by
higher sales from the MLM division, better margins from wholesale
products, higher rental income and lower R&D costs in other divisions. Maintain
NEUTRAL. We revise up our FY12 and FY13 forecasts by 6.2% and 7.1% respectively
in light of the better reported results. Our FV is raised to RM1.99 as we roll over
our valuation from FY12 to FY13 based on 12x PER. Maintain NEUTRAL given the limited
upside in the share price.
Source: OSK188
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