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O's latest financial results in line with expectations

PETALING JAYA: Hai O Enterprise Bhd latest financial results are in line with Affin Hwang Capital Bhd expectations.

reported a nine months to Jan 31, 2017 core net profit improvement of 63% year on year to RM41mil, in line with our estimates but above consensus, accounting for 74% and 80% of full year estimates.

group multi level marketing (MLM) division continued to drive earnings as the number of distributors continued to grow strongly. We maintain our earnings and with a target price of RM3.93 post the company recent 1 for 2 bonus issue, Affin said in a report.

The research house said the group 9M17 results continued to be driven by its MLM division (75% of revenue) where turnover and profit before tax for its MLM segment increased by 59% year on year and 80% year on year to RM213.3mil and RM42.3mil, respectively.

attribute this to the group growing distributor force which is currently growing at an average of 6,000 distributors per month and has reached over 100,000 distributors year to date.

believe its ticket items in the personal and household, beverage and healthcare segments and the launch of two new products in the food and beverage category during the financial year also have contributed positively to earnings, Affin said.

It added that the wholesale cartier choker necklace knock off division (14% of revenue) recorded a decrease in revenue of 4% year on year due to the increase in average selling price which affected sales volume, but saw earnings before interest and tax (Ebit) rise strongly by 42% year on year to RM6.9mil due to cartier mens gold chain knock off higher margin sales from cartier love necklace rose gold replica premium products.

The retail division posted a slight drop in replica cartier circle of love necklace revenue by 3% year on year due to weak consumer sentiment but an increase in EBIT by 42% to RM1mil due to the rationalisation of non performing outlets.
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