Hai-O’s 1HFY13 results beat consensus and our estimates. Revenue and core earnings were 18.5% and 34.5% higher y-o-y, boosted by the recovery of its MLM division. EBIT margin expanded due to healthy topline growth and better sales of higher margin products. We are revising upward our FY13 and FY14 numbers in view of stronger-than-expected earnings. Maintain NEUTRAL, but with a new FV ofRM2.35, based on 12x FY13 EPS.
Above consensus. Sales and core net profit (excluding a one-off compensation of RM0.57m received by the manufacturing division and a RM4.8m gain from disposal of vacant land) climbed 18.5% and 34.6% y-o-y to RM127m and RM21m, respectively. The good set of results were mainly driven by the strong recovery in its multi-level marketing (MLM) division, which contributed 64% and 42% of group revenue and PBT respectively. This reaffirms our view that the company’s MLM division is on the mend. Vis-à-vis the preceding quarter, the company’s revenue and earnings grew 7.9% and 16.5% q-o-q, buoyed by improved performance from the MLM division as well as wider margins.
MLM springs back. The MLM division’s revenue and pre-tax profit (PBT) surged 33% and 40% y-o-y to RM81m and RM14m respectively, bolstered by sales of its high-margin foundation garments, health food products and a newly-launched wellness product. Meanwhile, turnover in the wholesale division dipped by a marginal 2.5% as weakening conditions in the domestic market dampened orders, while the retail division reported weaker top- and bottom-lines due to tepid domestic consumption and higher operating costs. That said, the new outlets which Hai-O opened in the last financial year have yet to bear fruit. Other divisions, in the meantime, generated a PBT of RM8.6m vs RM2.6m y-o-y, largely attributed by one-off RM4.8m gain from the disposal of a piece of freehold vacant land and a one-off compensation amounting to RM0.57m, which arose from the early termination of a sales contract by a customer. EBIT margin ticked up 2ppt y-o-y to 22.7%.
Maintain NEUTRAL. We are adjusting our FY13 and FY14 earnings 8.8% and 9.1% higher respectively by incorporating better margins due to the company’s improving product portfolio. Hence, we lift our FV to RM2.35. Maintain NEUTRAL.
Above consensus. Sales and core net profit (excluding a one-off compensation of RM0.57m received by the manufacturing division and a RM4.8m gain from disposal of vacant land) climbed 18.5% and 34.6% y-o-y to RM127m and RM21m, respectively. The good set of results were mainly driven by the strong recovery in its multi-level marketing (MLM) division, which contributed 64% and 42% of group revenue and PBT respectively. This reaffirms our view that the company’s MLM division is on the mend. Vis-à-vis the preceding quarter, the company’s revenue and earnings grew 7.9% and 16.5% q-o-q, buoyed by improved performance from the MLM division as well as wider margins.
MLM springs back. The MLM division’s revenue and pre-tax profit (PBT) surged 33% and 40% y-o-y to RM81m and RM14m respectively, bolstered by sales of its high-margin foundation garments, health food products and a newly-launched wellness product. Meanwhile, turnover in the wholesale division dipped by a marginal 2.5% as weakening conditions in the domestic market dampened orders, while the retail division reported weaker top- and bottom-lines due to tepid domestic consumption and higher operating costs. That said, the new outlets which Hai-O opened in the last financial year have yet to bear fruit. Other divisions, in the meantime, generated a PBT of RM8.6m vs RM2.6m y-o-y, largely attributed by one-off RM4.8m gain from the disposal of a piece of freehold vacant land and a one-off compensation amounting to RM0.57m, which arose from the early termination of a sales contract by a customer. EBIT margin ticked up 2ppt y-o-y to 22.7%.
Maintain NEUTRAL. We are adjusting our FY13 and FY14 earnings 8.8% and 9.1% higher respectively by incorporating better margins due to the company’s improving product portfolio. Hence, we lift our FV to RM2.35. Maintain NEUTRAL.
Source: OSK
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