Haio: Earning Playing Catch-up!

Result Update

For QE31/1/2017, Haio's PBT rose 7% q-o-q or 65% y-o-y to RM21.7 million while revenue rose 7% q-o-q or 33% y-o-y to RM107 million. Overall revenue increased q-o-q due to higher revenue for the MLM, Wholesale & Retail divisions. Revenue for the MLM division rose 2.5% due to increased demand for personal care and household consumer products. Revenue for the Wholesale & Retail divisions rose 22% & 34% respectively, due to higher sales generated from the CNY sales promotion campaign.

PBT for the MLM & Retail divisions rose 6% & >100% respectively. The sharper increase in Retail division PBT was attributed to higher sales of house brand products with higher margin. PBT for Wholesale division dropped by 8% due to higher operating costs and A&P expenses incurred.

Despite higher PBT, NP dropped 3.4% q-o-q due to higher tax charge as deferred tax was recognized in profit or loss in the current quarter while capital and reinvestment allowance were utilized to reduce tax charge in previous quarter.


Table: Haio's last 8 quarterly results (Note: EPS, DPS & NTA ps have been adjusted for the latest 1-for-2 bonus issue.)


Graph: Haio's last 48 quarterly results

Valuation

Haio (closed at RM3.30 yesterday) is trading at a trailing PE of 18.4 times (based on last 4 quarters' EPS of 17.97 sen). Based on earning CAGR of 30% over the past 2 years, Haio's PEG ratio is about 0.6x. Thus, Haio is considered attractive as a growth stock.

Technical Outlook

Haio is a long-term uptrend. The share price has rallied substantially over the past 15 months. The last time this stock had such a strong rally was in 2010. That rally didn't end too well. Be careful!


Chart 1: Haio's monthly chart as at Mar 29, 2017 (Source: MalaysiaStock.biz)

If you compare the share price movement to the earnings from 2005 until the latest quarter, you will agree that share price may be running well ahead of fundamentals.

 
Chart 2: Haio's mthly chart as at Mar 29, 2017 with quarterly earning (Source: MalaysiaStock.biz)

Conclusion

Based on good financial performance & positive technical outlook, Haio is a good stock for long-term investment. However I would rate Haio as a SELL INTO STRENGTH as the share price is running ahead of the fundamentals as noted above.

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.