Haio has announced its results for 2Q2010 ended 31/10/2009. Its net profit increased by 85% y-o-y or 9.3% q-o-q to RM20.2 million while turnover increased by 52% y-o-y to RM132 million but declined by 10.9% when compared to the immediate preceding quarter (QE31/7/2009). The decline in the sale on a q-o-q basis could be a warning sign. Nevertheless, its profitability increased due to higher sales of high margin products by both the wholesale & retail divisions.
Table: Haio's 8 quarterly results
Chart 1: Haio's last 19 quarterly results
Valuation
Based on its closing price as at Dec 24 of RM7.97, Haio is now trading at a PE of 10 times (based on last 4 quarters' EPS of 79 sen). With its track record of steady growth, Haio may deserve a higher PE multiple (say, 12 times). As such, it may hit RM9.50-10.00.
Technical Outlook
Haio is now testing its recent high of RM8.05. That will be a strong resistance and a failure to surpass that level could set the stage for a correction in the stock. The 20-week SMA line may provide support for this stock at RM7.35-40 & thereafter the medium-term uptrend line may also provide support at RM6.50.
Chart 2: Haio's weekly chart as at Dec 28, 2009_10.15am (Source: Quickcharts)
Conclusion
Based on its improving financial performance, Haio's share price may continue to rise. However, the drop in the sale may be a warning sign, which we should not ignore. It will also encounter some resistance at the RM8.00 level, which was the recent high for this stock.
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