Hai-O Enterprise Bhd has embarked on several strategies to bolster its multi-level marketing (MLM) business, after a weak result in the first half of financial year 2011.
The result was mainly due to stagnant net membership growth due to slower-than-expected recovery in member sentiment.
Nevertheless, OSK Research has maintained Hai-O’s financial year 2011 and 2012 earnings forecast at RM27.2 million and RM32.2 million respectively, with the target price also unchanged at RM1.61.
“While we believe that its retail, wholesaling and manufacturing sales will continue to grow going forward, the recovery of Hai-O’s MLM division would be slow, given that this business hinges on member sentiment,” OSK Research said in its research note Tuesday.
Year-to-date, the MLM division has a total of 150,000 members, but this is expected to fall further by year-end.
The number of memberships expiring from the new recruitment of 5,000 per month previously, will offset additions in the next few months.
On its other divisions, OSK Research said Hai-O expects sales from these to improve, in the current financial year ending April 30, 2011.
“The drop in its MLM first half financial year 2011 sales of 74.1 per cent year-on-year was partially buffered by wholesaling, retail and manufacturing sales, which recorded year-on-year sales improvements of 17.1 per cent, 3.9 per cent and 5.4 per cent respectively.
“Management is positive on all three divisions,” OSK Research said.
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