PETALING JAYA: Hai-O Enterprise Bhd’s fast-expanding earnings, a potential dividend yield of about 12% and a cash-rich war chest are set to give investors at least some assurance amid the weakening purchasing power of consumers due to rising inflation and slowing economic growth, analysts said.
For its first quarter, Hai-O posted a 94.3% jump in net profit to RM13.6mil while revenue rose 90.5% to RM112.9mil. Earnings per share (EPS) improved to 16.8 sen from 10.53 sen.
According to OSK Investment Bank’s estimates, Hai-O is likely to generate EPS of 55.2 sen for the current year ending April 30 (FY09).
And with the company’s dividend policy of paying 50% of profit after tax to shareholders, OSK is expecting dividend per share of 40 sen for FY09, which translates into a dividend yield of close to 12% based on Hai-O’s last traded price of RM3.36.
The company, which is involved in multi-level marketing (MLM) of health and pharmaceutical products, had maintained a net cash position of RM81.5mil as at end-April 2008.
The strong balance sheet would also help the company weather tough times, especially when the cost of business had increased due to inflationary pressures and a tighter credit market, analysts said.
In the past four consecutive financial years, its earnings have been growing at double and triple digits, buoyed by the MLM business, which has seen an increase in sales and distributorship.
In the notes that accompanied its first-quarter results, Hai-O acknowledged that the purchasing power of consumers was being squeezed by rising inflation and a slowing global economy. The company plans to overcome that by introducing more new products, continuing to enlarge its distributor base and organising more sales campaigns.
While the internal target of a 20% growth in revenue for FY09 was unlikely to be achieved due to the weak market sentiment and high operating costs, the group’s performance would remain profitable, the company said.
Meanwhile, financial controller Hew Von Kin told StarBiz recently that Hai-O was still awaiting approval to start operations in Indonesia.
Hai-O was also planning to export some of its in-house products to China via its newly set-up subsidiary in Guangzhou, Hew said.
The company, for the second consecutive year, has made it to Forbes Asia’s fourth annual Best Under A Billion list.