Haio has just announced its results for QE30/4/2011. Its net profit increased by 35% q-o-q to RM8.5 million while turnover increased marginally by 1% to RM58 million. The improvement was attributed to "the recovery of MLM division... (which) has been emphasizing heavily in motivation and product training programs. The trip incentive campaign has successfully attracted a wider group of lower level core distributors which had contributed higher revenue to the MLM division".
When compared to the same quarter last year, Haio's net profit was lower by 40% while turnover was similarly lower by 41%. "The drop in revenue and pre-tax profit was mainly due to lower contribution from its principal subsidiary, the multi-level marketing (“MLM”) division, which remains as one of the largest contributor to the group". This explanation for the decline in financial performance on a y-o-y basis juxtaposed against the better financial performance on a q-o-q basis is somewhat confusing, but it bring out the importance of MLM division to Haio's overall financial performance. It also reflects the sharp decline in MLM business in the past one year. A better picture is given in Chart 1 below. However, some stability has returned to Haio's MLM business but it is still too early to expect a sharp recovery.
Table: Haio's last 8 quarterly results
Chart 1: Haio's last 25 quarterly results
Valuation
Haio (closed at RM2.16) is now trading at a PE of 15 times (based on last 4 quarters' EPS of 14.44 sen). At this multiple, Haio is overvalued. The only way one can justify this high PE is that the market believe that Haio can stage a dramatic recovery. Can it?
Technical Outlook
Haio broke below its intermediate term uptrend line (St-St) & long-term uptrend line(SS) in May & December 2010. Haio needs to go through a bottoming phase, which we have yet to see. Would it bottom at RM1.80-2.00 or RM1.30-1.50? We will have to wait & see.
Chart 2: Haio's weekly chart as at June 20, 2010 (Source: Tradesignum)
Chart 3: Haio's monthly chart as at June 1, 2010_log (Source: Tradesignum)
Conclusion
Based on overvaluation & poor technical outlook, Haio remained a stock to be avoided. However, we have noted that its financial performance has regained some measure of stability & the stock is woth close track for possible sign of recovery.
Hey Alex, whats your opinion on Glomac atm?
ReplyDeleteDear Alex,
ReplyDeleteThe price of Xingquan has been dropping like a stone the past few weeks. It has fallen from RM1.40 to RM1.09. What do you think of this counter?
Hi kerry lee
ReplyDeleteInvesting in Xingquan- as with investing in any PRC companies- requires a leap of faith. You look at its financial statements, you wonder whether they reflect a true & fair view of the company's financial performance & position. I have touched on this in an earlier post.
So, at the end of the day, you can only rely on the chart because it shows you the supply & demand for the stock. Of course, one may argue that even this can be manipulated.
From the chart, Xingquan is revisiting its all-time low of RM1.00. That should be a good support level. If this support hold, we may see some recovery in the share price. However, if this level failed, the stock would continue to decline.
Hi Hex
ReplyDeleteGlomac's financial performance has been very impressive. For FY2011, its net profit grew by 54% to RM63 million while turnover increased by 90% to RM601 million. EPS jumped from 14.2 sen to 21.5 sen. At the present price of RM1.88, Glomac is trading at a trailing PE of 8.7 times.
Chartwise, the stock is in an uptredn line, with support at RM1.65-1.67. It has also been trading within a range of RM1.60 & RM1.95 since January this year. An upside breakout above RM1.95-2.00 would lead to the continuation of its prior uptrend. A break below RM1.65-1.67 could lead to a reversal of that uptrend.