PETALING JAYA: A continuous flow of new products will ensure that Hai-O Enterprise Bhd’s earnings continue to be healthy in the financial year ending April 30, 2009 (FY09), according to financial controller Hew Von Kin.
The company, which is mainly engaged in manufacturing, wholesaling and multi-level marketing (MLM) of traditional herbal and pharmaceutical products, is mulling over a venture into the cosmetic and skincare segment next year.
“We’re looking at bringing overseas products, like those from South Korea,” Hew told StarBiz in a telephone interview yesterday. Presently, two of the company’s best selling products are the water filter and healthcare supplements.
He said the water filter was introduced two years ago and sales picked up in early 2007 when it launched the second-generation model.
“This (FY09) is the full year impact for the new filter,” he added.
Managing director Tan Kai Hee said the company also saw potential in introducing halal drink products to China, particularly in Xian, where a large Muslim community lived.
“It is still at very early stage. We need to have more discussions with various parties before making a decision,” he said.
Meanwhile, Hew said sales from Indonesia would kick in once operations take off by end of this year.
Hai-O posted a strong third quarter ended Jan 31, with net profit almost 170% higher at RM13.4mil compared with RM5mil in the previous corresponding period.
Sales doubled to RM100.5mil from RM51.4mil previously. For the first nine months, earnings per share (EPS) improved to 40.07 sen against 20.51 sen a year ago.Hai-O is consistently one of the best-performing groups with a large part of its business in MLM.
Hew said for FY09, it would be difficult to replicate the same growth rate seen in FY08, which was buoyed by the MLM division that grew more than 160% in the first nine months.
The MLM division was likely to continue to see about 2,000 new members every month.
Even in an economic downturn, MLM would still be quite good, as people would look for part-time income, he said, adding that the pay rise for public servants would also boost sales.
Hai-O’s current MLM members and customers are mainly government servants living in urban areas.
“Currently, we are expanding the network to cover rural areas too,” Hew added.
OSK Investment Bank, in a report, estimated that Hai-O would post net profit of RM38.3mil in FY08, and expected this to grow about 10% higher to RM42mil in FY09.
Hai-O’s balance sheet remained strong with net cash per share of 73 sen, it said, adding that the company was likely to declare a final dividend of 12 sen, bringing the total dividend for the year to 20 sen per share.
Based on yesterday’s closing price of RM3.20, this translates into a yield of 6.3%. The stock is attractively valued at a price-to-earnings ratio of 6.3 times on OSK’s estimated FY09 EPS of 50.6 sen.