OSK Research is positive on Hai-O Enterprise Bhdâ€™s earnings prospects despite the sluggish economic conditions mainly due to the companyâ€™s exposure to health food, which is recession-proof.
The research house said despite the expected negative impact of a weakening ringgit on its third quarter ending Jan 31, 2009 earnings, Hai-O should be able to weather the economic downturn relatively well given its exposure to healthcare products, which are considered defensive.
â€œWhile we are concerned over the impact of the depreciating ringgit versus the US dollar on group earnings given that 40% of Hai-Oâ€™s raw materials are transacted in US dollar, our house view is that the ringgit will strengthen to RM3.45-RM3.50 and RM3.40-RM3.45 this year and in 2010 respectively. Based on our analysis, a five-sen drop in the ringgit against the dollar would cut our forecast earnings by 0.8%,â€ it added.
It noted that Hai-O remained profitable even during the last Asian financial crisis. Also, the stock offers a compelling dividend yield exceeding 10%.
Logo from Hai-O.