SECOND board-listed company Hai-O Enterprise Bhd has set a dividend policy of distributing 50% of after-tax profit to shareholders, said group chief executive officer and managing director Tan Kai Hee.
“We have consistently paid dividends since the company was established. It is an unbroken track record for the past 30 years and now we're merely putting a policy in place,” Tan told StarBiz.
Hai-O is involved in wholesaling, retailing, multi-level marketing (MLM), and pharmaceutical product manufacturing. It also owns modern Chinese medicinal clinics.
He said the company was growing at double-digit rate every year.
In the MLM segment, it adds 1,000 new distributors each month. Presently, it has about 35,000 members, of whom some 20% are active. He said next year, sales from the MLM division were likely to grow by 20%, with up to RM6mil worth of products sold per month.
Hai-O, which is seeking a transfer to the main board next year, will be able to meet the requirements after this financial year ending April 30, 2007. “By then, we will have all the necessary materials in order to submit an application for the transfer,” Tan said.
The company, which started as an importer of China's goods, also intends to start exporting its own local brand products to China next year.
He said its expansion to Indonesia would be completed next year, too.
“It's the right time for us to go since our strategy is proven and our products are sellable. Our culture is similar to Indonesia's, and the republic is also a bigger market than Malaysia,” he said.
He added that the Indonesian expansion would not require a lot of money “since we already have the suppliers in place. We just need to set up the distribution network.”
Another plan for next year was to set up a bigger trading centre at the current premises at the Sun Building in Kuala Lumpur, Tan said.
The ninth floor, with space of 20,000 sq ft, has been identified as it provides better storage quality of products. This improves consumers' confidence in the company.
“We also intend to set up one in Klang, which is more convenient in terms of logistics. The Klang trading centre will eventually be turned into a hub for exports. We are currently looking for a suitable place,” he said.
Hai-O planned to explore the halal food hub arena with a bumiputra partner next year, Tan said.
The company released its first half-year ended Oct 31 financial results last week. Net profit in the first six months jumped to RM9.1mil from RM5.2mil in the previous year's corresponding period. Sales, on the other hand, improved to RM81.2mil against RM75.4mil previously.
The improvements were attributed to higher revenue achieved, coupled with higher profit margin achieved by wholesales, MLM and retail business divisions.
The company also declared an interim dividend of 5% tax exempt per share for the first half year.
OSK Securities, which recently initiated coverage on Hai-O, noted in a report that the company had disposed of its non-core operations to improve efficiency.
It said the halal certification on selective products had enabled Hai-O to have an edge over other Chinese traditional medicine and supplement sellers to tap the Muslim market in the country.
Based on the company's strong balance sheet, positive earnings growth potential and attractive dividend, Hai-O shares provided much upside prospects, OSK added.
Pu-er tea has investment potential: CEO
HAI-O Enterprise Bhd group chief executive officer and managing director Tan Kai Hee sees much investment potential in pu-er tea.
“The value of pu-er tea appreciates as the quality and benefits improve over time. That's the reason it is called the drinkable antique,” he said.
For example, the average price of pu-er tea that is fresh from the factory is between RM50 and RM100 per piece, and this can rise to RM500,000 over 40 to 50 years.
While the level of appreciation is unpredictable, as it is based on a willing buyer-willing-seller basis, the value is influenced by the fermentation process, brand and origins of the tea.
Tan said Yunnan in China produced the best pu-er tea, given that the trees grew at a height of 800 to 1,500 metres above sea level in a conducive climate.
Malaysia, on the other hand, has the best humidity to ferment pu-er tea, resulting in improved taste and effectiveness over time.
“The quality of pu-er kept in Malaysia for one year is equal to three years of storage in Yunnan,” he said, adding that the tea was beneficial for, among others, better sleep and weight control.
Besides treating it as a daily drink, consumers were also encouraged to be involved in the business by keeping pu-er tea at Hai-O's storage facility as a form of investment, Tan said, adding that they should only buy tea made by a trustworthy maker.
He said the trend of drinking tea was likely to improve over the next three to five years. In China, it was given as a diplomatic gift among government officials, he noted.
(STORIES BY YEOW POOI LING)