Thursday, April 11, 2013

HaiO ... Apr13

Although third quarter 2013 net profit of RM11mil is still far from its hey day of RM15mil to RM20mil in financial year 2009 to 2010, it is worth noting that the company's new strategy of focusing on higher margin products (eg foundation garments) developing new operating structure for its multi-level-marketing (MLM) division is bearing fruit.

Hai-O's nine-month financial year (ending April 2013 net profit had rebounded commendably by 31% year-on-year to RM32.2mil. This is attributed to the strong recovery from its MLM division, underpinned by the healthy membership growth and higher volume sales recorded in its bigger ticket items such as foundation garments, water filter and food purifier.

To recap, Hai-O's MLM division had experienced poor sales and membership growth (financial year 2011: +2.3%; financial year 2012: +5.3% vs financial year 2010's +30%) over financial year 2011 to 2012 owing to the imposition of more stringent rules on new membership recruitment under the new Direct Sales Act by the authorities in fourth quarter 2010. Consequently, the company's net profit plunged 60% year-on-year in financial year 2011 to RM28mil.

The management has since developed a successful operating strategy for its MLM division, and is currently experiencing strong rebound in membership growth.

With a sizeable membership of 140,000 currently (April 2013), Hai-O is confident of achieving a 15% to 18% growth in membership in financial year 2013 to 2015. The group opened seven new retail outlets in financial year 2012, bringing to a total of 72 outlets nationwide (four owned, 68 leased).

The group will continue to expand its footprint, targeting to open another three to five outlets in strategic locations by financial year 2014. Capital expenditure is estimated at RM20,000 to RM30,000 per outlet. Besides, the company will also refurbish and consolidate the unprofitable outlets.

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