KUALA LUMPUR: Affin Hwang Capital research is less upbeat on Hai-O Enterprise Bhd's multi-level marketing (MLM) segment.
"We cut our FY19-21E EPS estimates by -8.0%/-14.4%/-15.1% respectively to reflect our view of persisting challenges seen for its MLM segment, both in terms of its member base’s activities, as well as reception for its product range," it said in a research note.
The research house maintained its hold call on Hai-O with a lower target price of RM2.50 after revising its earnings per share lower.
In 9MFY19, Hai-O's core earnings declined 34% year-on-year to RM37.4mil, missing Affin Hwang's and consensus expectations.
The research house said this was due to a sustained slump in MLM segment sales, which fell 35.1% y-o-y to RM177.5mil, which correspondd to a 30.9% fall in EBIT to RM36.3mil.
Lower intersegment sales from the wholesale segment also weighed on oeprating profit, falling 52.7% y-o-y despite recording a flattish 0.6% external top-line growth.
The retails segment recorded 11.4% sales growth to RM31 mil but continued to be a minor earnings contributor.
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