KLCI Stock - HAIO / 7668 - 2011 Quarter 1

Market Cap : 202190282*3.08 = 622,746,068.56 (Moderate)
NTA per share : (212074-85)/199654 = 1.06
P/BV : 3.08/1.06 = 2.9057
Forecast P/E now : (3.08-0.12)/0.1564 = 18.93 (High)
ROE : 26.6% (High)
DY : 0.12/3.08*100 = 3.9%
Fixed Asset Turnover(3 year) : (1.5271+1.7111+1.7985)/3 = 1.6789 (High)
Liquidity Ratio : 177560/41158 = 4.3141 (Strong)
Receivables Collection Period : (17986+39343)/2/(417243/365) = 25 days (Acceptable)
My Target Price : Not interested unless revenue and profit increase more
My Decision : NOT BUY
My Comment : Revenue and profit dropping, bad cash flow but cash still strong, low debt and decreasing, navps increased, MLM division continue bad
Technical Support Price : 3
Risk Rating : HIGH
OSK Target Price : 1.61 (30 Sep 10)

My notes based on 2011 quarter 1 report (number in '000):

- For the first quarter ended 31 July 2010, the Group recorded 63.1% lower in revenue and 59% lower in pre-tax profit as compared to the corresponding quarter of the preceding year respectively. The drop in revenue and profit was mainly due to lower revenue recorded by the multi-level marketing (“MLM”) division. The effects of applying stringent rules on new members‟ recruitment and enhancement of stockists‟ management and professionalism since last financial year still need a longer time for the division and distributors to realign their business strategies. Despite the increased external sales of the wholesale division, pre-tax profit is lower compared to the preceding year as a result of lower profit contribution from its inter-segment sales

- However, the Group‟s operating profit margin of the current quarter had increased by about 2% compared to the previous corresponding quarter, mainly contributed from its higher margin products‟ sales, weakening of USD against Malaysian Ringgit which have contributed in reducing imported costs plus the improvement in operating efficiency

- For the first quarter under review, the Group recorded 44.6% lower in revenue and 31.6% lower in pre-tax profit as compared to the immediate preceding quarter. The retail division registered higher revenue and pre-tax profit in the immediate preceding quarter, contributed mainly from the sales made during the Chinese Lunar New Year promotion. The MLM division is currently going through a consolidation stage as mentioned above and therefore, this had affected the revenue and pre-tax profit

- Higher external revenue and pre-tax profit were achieved in the wholesale division as the division is currently having sales incentive promotion, which had encouraged majority of its customers to place more orders during the period

- Estimate next 4Q eps after 2011 Q1 result announced = 0.0391*4 = 0.1564, estimate PE on current price 3.08 = 18.93(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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