Haio announced its results for QE31/7/2010 yesterday. Its net profit dropped 45% q-o-q or 58% y-o-y to RM7.8 million while its turnover also declined by 45% q-o-q or 63% y-o-y to RM55 million. The decline in both turnover & net profit was attributable to lower revenue from the MLM division which was attributable to more stringent rules on new member's recruitment and enhancement of stockists' management & professionalism since the last financial year. To be frank, I really do not know what's the real issue affecting Haio. Needless to say that any company that has seen its top-line plummeted like what was experienced by Haio over the past few quarters is facing serious problem. See the table & Chart 1 below.
Table: Haio's 8 quarterly results
Chart 1: Haio's 22 quarterly results
Financial Position
Despite the poor financial performance, Haio's financial position is deemed satisfactory. As at 31/7/2010, its current ratio stood at 4.3 time while borrowings to shareholders' funds stood at 0.1 time.
Valuation
Haio (at RM2.96 as at 12.00 noon) is now trading at a trailing PE of 10 times (based on the last 4 quarters' EPS of 30.16 sen). While this may not look bad, this number is not a good guide as to Haio's future performance. The question on everyone's mind is whether the sharp plunge in Haio's top-line & bottom-line can be arrested. If so, when?
Technical Outlook
From the daily chart (Chart 2), Haio is still in a medium-term downtrend. The downtrend line resistance is at RM3.50 while the support from the parallel line is at RM2.90-2.95.
Chart 2: Haio's daily chart as at Sept 29, 2010_plotted on linear scale (Source: Quickcharts)
Despite the above, we can see that Haio is still in a long-term uptrend (plotted on log of scale) that start in late 2005 (see the weekly chart, Chart 3). The support from that uptrend line is at RM2.50.
Chart 3: Haio's weekly chart as at Sept 29, 2010_plotted on log scale (Source: Tradesignum)
Conclusion
Based on the above, it is prudent to avoid Haio until we can see signs of stability returning to the Haio's financial performance. For those who still wish to buy this stock, you should do so at a very slow pace if the share price can rebound off the long-term uptrend line at RM2.50.
2 comments:
“October’s no more scary than Zombie Island,” Cramer said. “You know, the Scooby Doo drama where this time the monsters are for real?”
In fact, October has been “a pretty good month historically,” he said, aside of those notable declines. And more importantly, these stories are detrimental to investors, especially the retail kind. They scare you out of solid, dividend-paying stocks and into bonds with their tiny returns.
http://www.cnbc.com/id/39419490
Hi Alex, what is your opinion on October market outlook ?
Hi Cheer,
From a September to remember (in a positive way) to an October to forget? Who knows! These days, I'm just glad that I didn't make a horrifically bad call. The market is very tricky and there are so many people with axes to grind. I am going to give your question a pass.
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