Monday, June 28, 2010

Hai-O - 4QFY10 - Sell

Business :
Hai-O is involved in wholesaling, retailing, multi-level marketing and pharmaceuticals, and also operates modern Chinese Medicinal Clinics.

Hai-O's FY10 net profit of RM70.9m (+35.6% y-o-y) was spot on versus our FY10 earnings forecast of RM71.7 despite the fact that the 4QFY10 top and PBT contracted by 25.6% and 32.3% y-o-y respectively given our conservative forecasts.
The poor 4Q performance was mainly attributed to its MLM division because the more stringent rules on new member recruitment set by the authorities and reduced appetite for loans following the rise in interest rates recently.

Stock Catalyst :
Technology Venture, which could come in as soon as this year. More parties have shown interest in its newly invented heat transfer technology.

Quick valuation:-
Haio is now trading at a PER of 12 times (based on last 4 quarters EPS 35 cents). With declining top-line and bottom-line, Haio might trade @PE <10 until it stablilize.

Technical Analysis:-
MACD cross signals the downtrend in short term. The RSI is heading to 30.

We would like to call Sell Into Strength on HAI-O

Technical Chart :-

Author: Peter Lee

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