Hai-O banks on pu-er tea, MLM By Kevin Tan Hai-O Enterprise Bhd, which is eyeing a transfer to Bursa Malaysia's Main Board next year, expects substantial revenue growth for its pu-er tea trading and multi-level marketing (MLM) activities.
The company is also strategising to step up its exports, including marketing to the Middle East and China, and is looking at the possibility of setting up MLM operations in Indonesia.
On its tea trading activities, Hai-O managing director Tan Kai Hee said it is expected to contribute more than 10% to the company's revenue in the financial year (FY) ending April 30,2007. This means revenue from pu-er tea trading would double from RM7 million in FY06 to about RM15 million in the current financial year, he told financialDaily in a recent interview.
Tan said the company is planning to invest a substantial amount of money is a tea trading centre in Malaysia. The centre will be located at one of Hai-O's existing premises near Jalan Bukit Bintang, Kuala Lumpur, and could be operational early next year, he added. We have collected tea that cost between RM6 million and RM7 million, Tan said, adding that pu-er was a unique tea that improved in it quality as it matured. The collections are mostly old vintage teas that could fetch higher prices than newly produced teas, he added.
On its MLM business, he expects a 20% revenue growth to RM60 million in FY07 from RM50 million in FY06. Tan said the company will recruit more users-cum-distributors for its products. He said currenly, 80% of its MLM distributors were Malays and the remiander were Chinese even though most of its products came from China. Before the economic crisis in 1998, 90% of its distributors were Chinese but most of them left for quicker gains in other companies.
As a result, Hai-O ventured into the non-Chinese market and had grown a base of loyal Malay distributors, Tan said. Tan said Hai-O's former chairman, the late Datuk Usman Awang, who was also a national literary laureate, helped pull in many highly educated Malays as distributors. He also said that some of its Malay distributors were able to earn more than RM1 million a year doing MLM.
We did something good. We helped develop Malay entrepreneurs, he added. Among others, the company recently got a halal certification for one of its most popular MLM products from China, Tongrentang Te Zhi Bai Feng Wan, which contributed RM7 million to RM8 million in sales.
Meanwhile, Hai-O financial controller Hew Von Kin is confident that it could be tranferred to the Main Board next year as it is on track to meet the RM50 million net profit track record in a five-year period. Transferring to the Main Board will improve our image and we can attract more institutional investors, he said.
Hai-O posted a net profit growth of 23.6% to RM9.9 million in FY06 from RM5.5 million previously, while its revenue rose to RM144.5 million from RM139.3 million. (the Sun, Monday August 28, 2006)