Affin Hwang maintains 'sell' on Hai-O, lowers TP to RM1.50

  • Business
  • Thursday, 19 Dec 2019

KUALA LUMPUR: Affin Hwang Capital research has cut its earnings forecast for Hai-O Enterprise Bhd in view of a more lacklustre outlook going forward, on the back of weak results in 6MFY20.

"We cut our FY20-22E EPS estimates by 5-15% respectively, mainly to factor in the overall weaker consumption spending, particularly on discretionary items," the research house said in a note.

In line with the cut, it maintained its sell rating and lowered its target price on the stock to RM1.50 from RM1.60 previously.

For the first six months of its 2020 financial year, Hai-O's net profit fell 38.8% year-on-year (y-o-y) to RM15.1mil, which was below Affin Hwang's and consensus expectations at 42% of full-year estimates.

Hai-O's revenue dropped 21.9% y-o-y to RM134.5mil due to declines in the multi-level marketing (MLM), wholesale and retail divisions.

According to Affin Hwang, MLM in particular suffered from overall weakness in consumption spending while members' recruitment and renewal were also affected.

Meanwhile EBITDA margin contracted 3.3ppt as a result of unfavourable sales mix coupled with a higher import purchase cost.
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