HAIO: Earnings Weakened

Results Update

For QE31/7/2016, Haio's net profit dropped by 13% q-o-q but rose 47% y-o-y to RM9.7 million while revenue dropped by 11% q-o-q but rose 42% y-o-y to RM79 million. Revenue dropped q-o-q for all three divisions: for the MLM division due to the Ramadan season and promotional sales in the previous quarter; for the wholesale division due to lower sales in Chinese medicated tonic and cooking wine which more than offset the additional contribution from one-off re-export sale of RM 2 million; and for the retail division due to year-end grand members’ sales campaign in the previous quarter. As a result of the lower revenue, MLM & retail divisions suffered a drop in PBT which more than offset the increased PBT in the wholesale division, which was due to lower operating expenses incurred in current  quarter and higher contribution from inter-segment sales.  


Table: Haio's last 8 quarterly results


Chart 1: Haio's last 46 quarterly results

Valuation

Haio (closed at RM3.41 yesterday) is now trading at a trailing PE of 17 times (based on last 4 quarters' EPS of 20.39 sen). At this PER, Haio is deemed fully valued.

Techncial Outlook

Haio is in an upward channel, with support at RM2.30 and the resistance at RM3.50. Last week it touched the resistance after a strong rally following the previous strong quarterly result. This latest quarterly result should be a cold shower to the players. A retracement within the channel is likely.


Chart 2: Haio's monthly chart as at Sep 21, 2014 (Source: Shareinvestor.com)

Conclusion

Based on weaker financial performance & full valuation, I believe some profit-taking activities may set in for Haio. You should consider doing the same and aim to buyback at RM3.00 or lower.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.