KUALA LUMPUR (Dec 17): Kenanga IB Research has maintained “Underperform” on Hai-O Enterprise Bhd at RM2.19 with a lower target price of RM2 (from RM2.29) and said the company’s 1H15 net profit of RM13.4 million (-32%) was below expectations.
In a note Wednesday, the research house said the result accounted for only 36.4% of house full-year forecast and 35.4% of the consensus estimates.
It said the negative deviation could be attributed to worse-than-expected performance of its MLM division as well as higher-than-expected import costs of the wholesale division
On teh outlook for the company, Kenanga IB Research said the MLM division will continue to suffer from the transition as Hai –O tries to switch focus to ‘smallticker items’; while the overall consumer sentiment is soft in light of the higher cost of living environment.
“Meanwhile, the wholesale division is expected to see further margin compression in view of the unfavourable forex.
“The Retail division is also not expected to see overwhelming performance due to the higher operating costs as well as subdued consumer sentiments.
“Overall, we maintain our negative stance on HAIO.
“We correspondingly reduce our target price to RM2.00 (from RM2.29) with the earnings cut. Our target price is based on unchanged 12.6x PER FY15E, which implied 5-year mean,” it said.
At 9.30am, Hai-O rose 1.83% or four sen to RM2.23 with 11,500 shares done.