Result

• Hai-O posted a net profit of RM9.6m during 4QFY20, which rose 26.3% qoq but down 7.7% yoy. Meanwhile, revenue was sluggish, -19.9% qoq and - 23.3% yoy.

• As for full year FY20, the Group recorded a net profit of RM32.2m which slid 32.4% yoy on the back of slumbering revenue of RM255.2m (-22.3% yoy). The disappointing performance was dented by poor results from all of its segments in view of lower sales incurred during movement control order (MCO) arising from COVID-19 pandemic which halted the business operations.

• Above expectations. Nevertheless, 12MFY20 net profit of RM32.2m is substantially above our and consensus expectations, accounting for 111.8% of full year earnings estimates. The higher-than-expected results are underpinned by robust sales from Puer-tea coupled with exports of bird nest products under Wholesale division.

Comment

• Stellar QoQ earnings from MLM segment failed to boost overall Group’s performance. The Groups’ revenue and PBT deteriorated 19.9% qoq and 0.9% qoq respectively during 4QFY20. Lower revenue recorded was due to lower sales across all of its segments (revenue for MLM: -3.8% qoq; Wholesale: -35.3% qoq; Retail: -47.6% qoq) as the Group’s business operation ran at minimal level during MCO period. Meanwhile, PBT was dragged down by poor results from Wholesale and Retail segments (PBT margin for each segment dropped 7.2ppts and 21.9ppts respectively). However, PBT from MLM segment soared by 9.0ppts, thanks to social media as a platform for marketing and campaign activities which helped the operating efficiencies.

• Disappointing YoY results bogged down by dismal showings from all segments. Hai-O PBT dropped 21.0% yoy amid dwindling revenue, -23.3% yoy. The result was dampened by sluggish performances from MLM segment (revenue:-25.5% yoy; PBT:-1.9% yoy), Wholesale segment (revenue:-10.7% yoy; PBT:-35.6% yoy) and Retail segment (revenue:-35.6% yoy; LBT: RM0.9m) due to lower sales impacted by COVID-19 pandemic. Moreover, PBT was also deteriorated by credit loss amounting RM1.1m from Wholesale division as required under MFRS16

Source: JF Apex Securities Research - 30 Jun 2020