Hai-O expects a better FY15 driven by new higher-margin products

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KUALA LUMPUR: Traditional healthcare company Hai-O Enterprise Bhd expects a “better” financial year ending May 31, 2015 (FY15), as it retires legacy products and replaces them with new, higher-margin products that are in accordance with international standards, said group managing director Tan Kai Hee (pic).

“We are optimistic that our overall performance will be better next year despite a challenging operating environment. We should be able to maintain our sales volume, and our key fundamentals are strong,” Tan told pressmen after Hai-O’s annual general meeting yesterday.

He said the group is also considering a 100% dividend payout for FY15 in conjunction with its 40th anniversary to reward its long-term shareholders. Hai-O presently has a dividend policy of distributing 50% of its net profit to its shareholders.

Hai-O is also looking at revaluing its properties next year, which Tan said has been recorded in the books at cost price, but did not elaborate further. Its 2014 annual report showed that it had properties in the Klang Valley, Pahang, Johor Baru and Kuching with a net book value of at least RM90.4 million.

Meanwhile, Hai-O general manager for its multilevel marketing (MLM) division Teoh Nee Siang said “small-ticket” items currently contribute to more than half the revenue from his division and has been cushioning the decrease from “big-ticket” items as overall market sentiment slows down.

He said the group’s MLM operations in Indonesia have been facing challenges in terms of product registration due to regulatory changes in the host country but noted that it had already identified suitable products that need not undergo the regulatory process, “as well as an appropriate partner”, to drive the Indonesian market.

The group is also considering revising the selling prices of selected products, alongside the use of more aggressive promotional campaigns, to boost sales in anticipation of the goods and services tax that will be implemented next April, said its chief financial officer Hew Von Kin.  Hai-O, which derives 59% of its revenue in FY14 from its MLM segment, reported a 29.2% drop in net profit to RM6.22 million in the first quarter ended July 31, 2014 (1QFY15) from RM8.79 million in 1QFY13, while revenue fell 9% to RM49.78 million from RM54.68 million.

This article first appeared in The Edge Financial Daily, on October 16, 2014.