Stock Review – HAIO (7668) (HAI-O ENTERPRISE BERHAD)

Bursa Malaysia - 7668

Bloomberg - HAIO:MK
Yahoo - 7668 .kl
Webpage - https://www.hai-o.com.my/

Company Profile

HAIO established in 1975 and has since become an establish household name offering wide range of complementary medicine (TCM), medicine tonic as well as wellness, beauty and healthcare products and clinical services. HAIO have business presence nationwide with 57 retail chain stores and franchises, 37 Multi-Level-Marketing (MLM) branches, stocklists and sales points, and 2 GMP manufacturing plants across Malaysia.

HAIO had joint venture with world renowned Beijing Tongrengtang since 2002 to offer TCM consultation services and high quality herbal medicines to public.

1) Operating Segment

HAIO consists of 3 main reporting segments as follow:

Segment	% 2019 Revenue	Asset Turnover	Return on Asset (%)	% 2019 CAPEX
Multi-Level-Marketing	68.48	1.59	33.51	48.57
Wholesales	17.96	0.35	38.13	27.07
Retail	12.35	1.20	2.73	2.71
Non Reportable segment	1.21	0.11	4.10	21.65

From 2019 annual report, Multi-Level-Marketing (MLM) segment is producing the most revenue for HAIO in 2019, 68.48 % of 2019 are from Multi-Level-Marketing segment. MLM segment had high asset turnover and return on asset hence it is not surprise most of the capital expense, CAPEX, for the year 2019 go to this segment. (48.57 % of 2019 CAPEX).

HAIO had invested RM 8,296,000, 2.53% of 2019 revenue into CAPEX. RM 1,796,000 was invest into other non-reportable segment which only generate RM 3,980,799 revenue over the year of 2019 (45% of revenue generate from others segment is invest back into the segment)

PROS:

è 48.57 % of 2019 CAPEX go to MLM which has high Asset turnover ratio and return of asset.

CONS:

è 21.65 % of 2019 CAPEX go to non-reportable operating segment which is not the main operating segment of HAIO è 45% of revenue generate from non-reportable segment is invested back into the segment.

Financial Statement

HAIO investment properties had decrease from RM 55,949,690 (2018) to RM 45,658,791 (2019), 18.39 % decrease. It is mainly because the decrease in the value of the freehold and leasehold land held by HAIO. However the net rental income had increase from RM 1,640,616 to RM 2,723,831, 66.02% increase.

The trade and others receivable of HAIO has decrease from RM 31,951,966 to RM 21,783,945, 31.82% decrease and the trade receivable past due also decrease from RM 3,257,059 to RM 2,180,565, 33.05 % decrease. The decrease of the trade and others receivable is mainly due to the decrease in sales from RM 461,969,489 to RM 328,406,809, 28.91% decrease in sales.

HAIO cash and cash equivalents had also decrease from RM 68,674,442 to RM 53,792,063, 21.67% decrease.

PROS:

è 66.02% increase of net rental income.

CONS:

è  28.91% decrease in revenue. è 21.67% decrease in cash and cash equivalents

HAIO had low loans and borrowing which is RM 289,000 in 2019. In 2019 HAIO had contract liabilities which is revenue recognised overtime during the membership period expected to recognised as revenue over the perios of 3 years to 1 years.

PROS:

è HAIO had low loans and borrowing

Financial Ratio

Description	2019	2018	Different
Gross Profit Margin	0.38	0.35	+0.03
Net Profit Margin	0.14	0.16	-0.02
Interest Coverage Ratio	578.56	808.87	-230.31
Effective Tax	0.25	0.25	0.00

Warrant

No Warrant issue

Dividend and Bonus Issued for the past five year

HAIO had constant dividend for the past five year from 2014 – 2018 with the average of RM 0.14 with the dividend yield of 5.56 % base on HAIO stock price of RM 2.52 on 21/9/2019.

PROS:

è HAIO had dividend yield of 5.56 % for the past five year which is higher than fixed deposit of 3.00%

Market Research

Affin Hwang Capital (26 June 2019)

Price Target : RM 1.80

•  Incentive trip campaign failed to revitalise MLM sales

JX APEX Security Bhd (26 June 2019)

Price Target : RM 2.24

• MLM division - business environment remain challenging
• Wholesale division – focus on core products
• Retail division – continuous expansion

KENAGA Investment BankBerhad (26 June 2019)

Price Target : RM 1.95

• Pressure from stagnant distributors’ growth
• Weakening of MYR against RMB

Estimated Price

IVKLS Price : RM 1.53

Summary of Stock Reviews

Stock Review – POHUAT (7088) (POH HUAT RESOURCES HOLDINGS BERHAD)

Bursa Malaysia - 7088

Bloomberg - PHR:MK
Yahoo - 7088 .kl
Webpage - http://www.pohhuat.com/

Company Profile

POHUAT has 30 years experiences in producing world class office system and furniture system. POHUAT has intergraded manufacturing facilities in Malaysia and Vietnam. POHUAT products are AT Office System and At Home System.

1) Geographical Information

POHUAT is operated in two major locations which are:

1) Vietnam – 55.30 % of 2018 revenue

2)  Malaysia – 44.70 % of 2018 revenue

2) Major Customer

POHUAT has three customers which are:

1) Customer A – 25.23 % of 2018 revenue

2) Customer B – 17.91 % of 2018 revenue

3) Customer C – 9.99 % of 2018 revenue

CONS:

è POHUAT has three customers represent 53.13 % of 2018 total revenue.

Financial Statement

POHUAT Property, Plant and equipment had increase from RM 137,103,111 in 2017 to RM 162,361,950 in 2018, increase by 18.42 %. On 21 January 2018, there was a fire destroying one of the five factories of a subsidiary. On 17 July 2018, POHUAT acquired 3,212 square meters detached warehouse cum office showroom in Cranbourne West, Victoria, Australia for a total cash of AUD 4.95 million ( RM 14.99 millions).

POHUAT Deposit, bank and cash balances had decrease by 3.2 % which is from RM 92,857,041 in 2017 to RM 89,887,631 in 2018.

There is RM 1,085,961 non current asset held for sale as POHUAT is planned to sell 2 units of warehouses in South Africa.

CONS:

è 21 January 2018, there was a fire destroying one of the five factory of a subsidiary. è 17 July 2018, POHUAT acquired warehouse cum office showroom in Australia but POHUAT had no operating revenue from Australia in 2018 è Planning to sell 2 units of warehouses in South Africa è Deposit, bank and cash balance had decrease by 3,2 %.

POHUAT bank borrowing had decrease from RM 21,991,818 in 2017 to RM 18,485,177, decrease by 15.95 %.

PROS:

è Bank Borrowing had decrease by 15.95 %

Financial Ratio

Description	2018	2017	Different
Gross Profit Margin	0.16	0.20	-0.04
Net Profit Margin	0.08	0.09	-0.01
Interest Coverage Ratio	46.66	45.56	+1.10
Effective Tax	0.18	0.17	+0.01

Warrant

At 23 January 2019 POHUAT had 46,903,027 warrants unexercised with the exercised price of the warrants to be RM 1.00 expired date of 21 Oct 2020.

CONS:

è The Warrants are in of money and warrant maturity date is about one and half years. There would be more warrants convert into shares which would dilute the share price.

Dividend and Bonus Issued for the past five year

POHUAT had constant dividend for the past five year from 2014 – 2018 with the average of RM 0.0417 included adjustment of subdivide on 16 October 2015 with the dividend yield of 2.71 % base on POHUAT stock price of RM 1.54 on 22/4/2019

CONS: è POHUAT had dividend yield of 2.71% for the past five year which is lower than fixed deposit 3.15%.

Market Research

Asia Analytica Sdn Bhd (20 March 2019)

Price Target : RM 1.59

·       Consistently strong sales growth for Malaysia operation

·       Higher sales volume for Vietnam operation

Affin Hwang Capital (15 March 2019)

Price Target : RM 1.71

·       Higher contribution from both Malaysia and Vietnam Operation

Estimated Price

IVKLS Price : RM 1.84

Peers

1)   LIIHEN

2)   LATITUD

3)   HOMERITZ

4)   WEGMAS

5)   SYF

6)   JAYCORP

7)   SWCAP

8)   DPS

9)   HHGROUP

10) SHH

Industry Comparison - Furniture

Summary of Stock Reviews