KUALA LUMPUR (June 30): Hai-O Enterprise Bhd rose as much 10 sen or 3.66% to RM2.83 in morning trade today to hit its six-year high following an above-consensus full-year financial performance.
The counter later gave up the gains to trade at RM2.81 apiece, still up 8 sen or 2.93% as at 10.45am. However, only a thin volume of 293,600 units changed hands.
Year to date, the counter has gained 20.6%.
Yesterday (June 29), the multi-level marketing (MLM) company announced that its net profit grew 24.4% to RM11.2 million in the fourth quarter ended April 30, 2016 (4QFY16) from RM9 million in the previous corresponding quarter.
Quarterly revenue increased by 25.8% to RM88.6 million from RM70.4 million in 4QFY15.
Hai-O also proposed a final single tier dividend of 11 sen per share, in respect of the financial year ended April 2016 (FY16).
The company attributed the improved earnings to higher revenue achieved by the MLM division.
AffinHwang Capital maintained its "sell" call for the counter with a higher target price of RM2.40.
"We introduce our 2019 estimate numbers and increase earnings by 17% to 18% for FY17–18E after updating our assumptions for the MLM division. We increase our target price to RM2.40, based on price-earnings ratio (PER) of 11.6 times (five-year historical PER) and calendar year 2016 estimate (CY16E).
"However, we still maintain our 'sell' call as stock price has reached a high of RM2.73 (peak of RM3.17 in 2010). Note that Hai-O has been actively buying back its shares and currently holds 4.5% of its total issued and paid-up share capital, which brings up the possibility of a share dividend distribution to shareholders," AffinHwang said in a note today.
The research firm added that key risks to its call include a stronger upturn in consumer spending; a strengthening of the ringgit against US dollar, which will reduce import costs; and higher growth of members for the MLM business.