KUALA LUMPUR: Hai-O Enterprise Bhd is planning new products and promotions in response to soft market conditions afflicting the multi-level marketing segment.
In a note, Affin Hwang Capital research said the group was looking to launch a new product pipeline focused on "small-ticket items" to aknowledge the shift in market demand.
It added that it was also looking to revamp its recruitment and retention programme in 2019 to revilalise its depressed distributor base.
To recap, Hai-O's 9MFY19 results were below Affin Hwang's and consensus expectations and the MLM segment's performance remained lacklustre, dropping 35% year-on-year.
"Management experienced challenges with membership attrition (falling from a peak of 160k distributors) following the company’s 25th anniversary grand sales promotion in 1HFY18, alongside persisting weakness in the market," the researc house said.
The group's wholesale and retail segments performed better but contributed only about 26% of group EBIT for the financial year to date.
Affin Hwang expects more volatile performances for the group in 2019 despite the management's response to the underlying market conditions.
However, it expects a stronger 4Q for the group due to seasonally better performance for the MLM segment.
The research house maintained its hold call on Hai-O with an unchanged target price of RM2.50.
"Although management’s pivot could pay off in the long run, we foresee CY19 to remain challenging for Hai-O," it said.
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