Thursday, June 23, 2011


Friday, June 24, 2011
Haio- calm returned
Results Update

Haio has just announced its results for QE30/4/2011. Its net profit increased by 35% q-o-q to RM8.5 million while turnover increased marginally by 1% to RM58 million. The improvement was attributed to "the recovery of MLM division... (which) has been emphasizing heavily in motivation and product training programs. The trip incentive campaign has successfully attracted a wider group of lower level core distributors which had contributed higher revenue to the MLM division".

When compared to the same quarter last year, Haio's net profit was lower by 40% while turnover was similarly lower by 41%. "The drop in revenue and pre-tax profit was mainly due to lower contribution from its principal subsidiary, the multi-level marketing (“MLM”) division, which remains as one of the largest contributor to the group". This explanation for the decline in financial performance on a y-o-y basis juxtaposed against the better financial performance on a q-o-q basis is somewhat confusing, but it bring out the importance of MLM division to Haio's overall financial performance. It also reflects the sharp decline in MLM business in the past one year. A better picture is given in Chart 1 below. However, some stability has returned to Haio's MLM business but it is still too early to expect a sharp recovery.

Table: Haio's last 8 quarterly results

Chart 1: Haio's last 25 quarterly results


Haio (closed at RM2.16) is now trading at a PE of 15 times (based on last 4 quarters' EPS of 14.44 sen). At this multiple, Haio is overvalued. The only way one can justify this high PE is that the market believe that Haio can stage a dramatic recovery. Can it?

Technical Outlook

Haio broke below its intermediate term uptrend line (St-St) & long-term uptrend line(SS) in May & December 2010. Haio needs to go through a bottoming phase, which we have yet to see. Would it bottom at RM1.80-2.00 or RM1.30-1.50? We will have to wait & see.

Chart 2: Haio's weekly chart as at June 20, 2010 (Source: Tradesignum)

Chart 3: Haio's monthly chart as at June 1, 2010_log (Source: Tradesignum)


Based on overvaluation & poor technical outlook, Haio remained a stock to be avoided. However, we have noted that its financial performance has regained some measure of stability & the stock is worth close track for possible sign of recovery.


Should the price is still high...................