This article first appeared in The Edge Financial Daily on September 26, 2018

KUALA LUMPUR: Following the record-breaking net profit for its financial year ended April 30, 2018 (FY18), multilevel-marketing (MLM) company Hai-O Enterprise Bhd hopes to perform better in the current financial year despite challenges it sees ahead.

Speaking to reporters after the company’s annual general meeting yesterday, Hai-O’s group chief financial officer Hew Von Kin said among these challenges are uncertainties of new policies from the new government as well as tensions between the two largest economies in the world which the group sees have dampened consumer sentiment somewhat.

“While we are striving to have better results this [financial] year, it still depends on the market. If the market reacts negatively, or if people are not spending money ... this is our main concern,” said Hew, adding the group has initiated various measures to counter the challenges.

As such, Hai-O is cautiously optimistic about the company’s outlook. Hew said the company’s focus is now on expanding its product offerings, strengthening its digital presence via its e-commerce platforms and increasing cost efficiency.

Also present were Hai-O group managing director Tan Keng Kang.

Hai-O’s net profit for FY18 jumped 26% to RM74.83 million from RM59.48 million in FY17, as revenue grew 14% to RM461.78 from RM404.24 million.

Meanwhile, Hew said Hai-O has yet to determine the net impact of the new sales and service tax (SST) regime on its performance, though the group has initiated talks with its suppliers to ask them to absorb a portion of the SST, based on the current weak market.

Post-SST, the group has maintained its prices.

For FY19, the group has allocated about RM3 million from its internal funds to upgrade its retail outlets.

On member recruitment, an on-going activity, Hew said interest slowed down of late, so Hai-O is looking at increasing the productivity of its active members instead of just looking at getting new ones. To-date, the group has about 140,000 members in its MLM segment compared with 60,000 members two years ago.

Outside Malaysia, Hai-O is targeting to break even in Indonesia this financial year despite the weakening of the rupiah, said Hew.

The group, he said, will be leveraging on its Indonesian business partner’s network.

Nevertheless, contribution from its Indonesian business to the group’s total revenue is “very minimal”.

On Vietnam, Hew said Hai-O has temporarily shelved its expansion plan due to the current weak market condition there.

According to Hew, overseas business contributes less than 2% to the group’s business currently.

Hai-O shares fell 11 sen, or 2.67%, to RM4.01 yesterday, for a market capitalisation of RM1.17 billion. In the past one year, the stock has retreated some 15.9%.