KUALA LUMPUR (Oct 16): Multi-level marketing firm Zhulian Corp Bhd fell as much as 31 sen or 13% to RM2.04 on weaker-than-expected financial performance in the third quarter ended August 31, 2014 (3QFY14).

Zhulian, the bourse's sixth-largest decliner, subsequently reduced losses at afternoon break. At 12.30pm, the stock settled at RM2.07 with some 1.4 million shares traded.

Yesterday, Zhulian said its 3QFY14 net profit fell 73.8% on year to RM10.4 million from RM39.6 million in the previous corresponding quarter. Revenue also fell to RM57.2 million from RM124.1 million.

According to Kenanga Investment Bank Bhd, Zhulian’s results were below expectation as 9MFY14's lower net profit at RM35.8 million accounted for only 46.6% of Kenanga's forecast.

“We are disappointed with the numbers as (9MFY14) net profit of RM35.8 million only accounted for less than 30% of RM121 million the group recorded in FY13.

“The Thai market is still struggling to embark on a quick recovery after the political unrest while the local market is dealing with high level of competition in a saturated and challenging market condition,” Kenanga said in a note today.

Kenanga downgraded Zhulian shares to "underperform" with a lower target price of RM2.00
This compares to RM2.70 previously.

The TP downgrade followed an earnings forecast cut on Zhulian by Kenanga.

"We slashed our earnings forecasts as we factor in lower distributor productivity in both Thai and Malaysia markets as well as higher effective tax rate of 20% (from 17%-19%)
which resulted in 35% and 26% downward revisions in forecast FY14 and FY15 net profit, respectively," Kenanga said.