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Friday, February 18, 2011

KLCI Stock - HAIO / 7668 - 2011 Quarter 2

Company Info
Market Capital (Capital Size)529,738,538 (Medium)
Par ValueRM 0.50

My Analysis
Forecast P/E now(2.62-0.1)/0.1167 = 21.59 (High)
Target Price0.93+0.1 = 1.03 (PE 8.0, EPS 0.1167, DPS 0.1)
DecisionNot BUY unless revenue and profit increase more
Revenue fifth consecutive quarter decreasing and is lowest since FY07Q4, eps fourth consecutive quarter largely decreasing and is lowest all the time, negative free cash flow and negative net cash flow both also increased, liquidity ratio increasing at strong level now, gearing ratio decreasing at low level now, all accounting periods are good, MLM division performance more worst
First Support Price2.5
Second Support Price2.2
Risk RatingHIGH

Research House
RHB Target Price1.71 (2010-12-20)

Accounting Ratio
Return on Equity21.35%
Dividend Yield7.82%
Profit Margin17.26%
Tax Rate26.97%
Asset Turnover1.23
Net Asset Value Per Share1.09
Net Tangible Asset per share1.09
Price/Net Tangible Asset Per Share2.69
Cash Per Share0.57
Liquidity Current Ratio4.973
Liquidity Quick Ratio3.8179
Liquidity Cash Ratio3.1528
Gearing Debt to Equity Ratio0.22
Gearing Debt to Asset Ratio0.1751
Working capital per thousand Ringgit sale42.5%
Days to sell the inventory54
Days to collect the receivables26
Days to pay the payables30

My notes based on 2011 quarter 2 report (number in '000):-
- For the second quarter ended 31 October 2010, the Group recorded lower revenue and pre-tax profit of RM 52.62 million and RM 9.09 million as compared to RM 132.37 million and RM 28.64 million of the corresponding quarter of the preceding year respectively. The drop in revenue and profit was mainly due to lower contribution by its principal subsidiary, the multi-level marketing (“MLM”) division which was the largest contributor to the Group in the preceding year. The recent amendments to the Direct Sales Act appear to have affected the confidence of the direct selling industry. These measures coupled with slower membership growth have directly affected the performance of the MLM division

- The effective sales and marketing strategy in the wholesale division contributed higher external revenue in the second quarter, however lower contribution from its inter-segment sales mainly to MLM division had resulted lower pre-tax profit generated in the current quarter

- For the second quarter under review, the Group recorded lower revenue and pre-tax profit of RM 52.62 million and RM 9.09 million as compared to the immediate preceding quarter of RM 54.75 million and RM 10.79 million, mainly due to the lower contribution from the MLM division and unusually, sales during Ramadhan month were significantly lower. Overall confidence of the distributors was slower to recover after the recent legislative changes described above

- However, the wholesale and retail divisions registered higher revenue and pre-tax profit in the second quarter as compared with the immediate preceding quarter. The members' sales promotion by the retail division usually carried out in the second quarter had contributed higher revenue and pre-tax profit to the Group

- Estimate next 4Q eps after 2011 Q2 result announced = 0.0307*4*0.95 = 0.1167, estimate PE on current price 2.62 = 21.59(DPS 0.1)
- Estimate next 4Q eps after 2011 Q1 result announced = 0.0391*4 = 0.1564, estimate highest/lowest PE = 20.01/17.46 (DPS 0.12)
- Estimate next 4Q eps after 2010 Q4 result announced = 0.0714*4 = 0.2856*1.1(10% QbQ improvement adjustment) = 0.3142, estimate highest/lowest PE = 12.16/8.78 (DPS 0.2)
- Estimate next 4Q eps after 2010 Q3 result announced = 0.3729, estimate highest/lowest PE = 12.42/9.17 (DPS 0.18)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.2424*4 = 0.9696, estimate highest/lowest PE = 10.78/7.44(DPS 0.42)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.2217*4 = 0.8868, estimate highest/lowest PE = 8.54/6.33 (DPS 0.42)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.1778*4 = 0.7112, estimate highest/lowest PE = 7.44/5.76 (DPS 0.4)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.1463*4 = 0.5852, estimate highest/lowest PE = 6.9/5.06 (DPS 0.4)

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