KLCI Stock - HAIO / 7668 - 2011 Quarter 3

Company Info

Market Capital (Capital Size)	440,774,814 (Small)
Par Value	RM 0.50

My Analysis

Forecast P/E now	(2.18-0.04)/0.1336 = 16.02 (High)
Target Price	1.07+0.04 = 1.11 (PE 8.0, EPS 0.1336, DPS 0.04)
Decision	Not interested unless revenue and profit increase more
Comment	Revenue increased 9.5% but lower than preceding year corresponding quarter 56.1%, eps increased 3.6% but lower than preceding year corresponding quarter 64.7%, cash generated from operating is not enough to cover dividend, weaker liquidity ratio but still at high level now, higher gearing ratio but still at low level now, all accounting periods are good, except manufacture division, all division higher revenue
First Support Price	2.07
Second Support Price	1.8
Risk Rating	HIGH

Research House

OSK Target Price	1.93 (2011-03-24)
RHB Target Price	1.35 (2011-03-24)

Accounting Ratio

Return on Equity	16.46%
Dividend Yield	7.57%
Profit Margin	15.66%
Tax Rate	25.80%
Asset Turnover	1.015
Net Asset Value Per Share	0.99
Net Tangible Asset per share	0.99
Price/Net Tangible Asset Per Share	2.29
Cash Per Share	0.4
Liquidity Current Ratio	3.3676
Liquidity Quick Ratio	2.3458
Liquidity Cash Ratio	1.8158
Gearing Debt to Equity Ratio	0.2807
Gearing Debt to Asset Ratio	0.2125
Working capital per thousand Ringgit sale	39.4%
Days to sell the inventory	73
Days to collect the receivables	32
Days to pay the payables	49

My notes based on 2011 quarter 3 report (number in '000):-
- The drop in revenue and profit was mainly due to lower contribution by its principal subsidiary, the multi-level marketing(“MLM”) division

- However, the retail division had registered higher revenue, increase by about 37% and pre-tax profit increase by almost 85% due to strong festive sale during the Chinese Lunar New Year, as compared to last year, which fell in the fourth quarter of the last financial year. Whereas the higher external revenue generated from the wholesale division has been offset by the lower inter-segment sales from the MLM division, which had resulted in lower pre-tax profit

- Higher revenue mainly due to higher contribution from the retail division and the recovery of MLM division‟s sales. The MLM division has been stepping up its efforts in product training programs and promotional activities which has helped the division to pull up its sales

- Nevertheless, due to the higher personnel and operating costs during the festive season incurred in the third quarter, the pre-tax profit did not improve much as compared with the immediate preceding quarter despite higher revenue achieved

- Estimate next 4Q eps after 2011 Q3 result announced = 0.0318*4*1.05 = 0.1336, estimate PE on current price 2.62 = 16.02(DPS 0.1)
- Estimate next 4Q eps after 2011 Q2 result announced = 0.0307*4*0.95 = 0.1167, estimate highest/lowest PE = 23.91/18.25 (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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