Hai-O's 1QFY13 results were in line with consensus and our numbers. We deem the results in line as 1Q is generally a stronger quarter. The stronger revenue and earnings  from  the  MLM  division  buoyed  the  company's results.  However,  EBIT margin was flat as the higher margins from MLM and other segments were offset by  the  lower  margins  from  retail  and  wholesale  businesses.  Maintain  NEUTRAL, with FV RM2.16, based on 12x FY13 EPS.

In line. The group's 1QFY13 results were within consensus and our forecast. Revenue and core earnings (excluding a one-off compensation of RM0.57m in the manufacturing division)  expanded  by  19.8%  and  21.2%  y-o-y  to  RM61.1m  and  RM9.7m  respectively, boosted  by  better  performance  in  its  multi-level  marketing  (MLM)  division.  On  q-o-q basis,  Hai-O's topline declined  by  12.0%  but  its  bottomline  grew  15.5%  on  margin improvement.

MLM firmly on growth path. Revenue and PBT from the major contributor  ' the MLM division ' surged 39.3% and 68.2% y-o-y respectively due to stronger turnover from its high margin foundation garments and health food products. In addition, the division has been undertaking sales campaigns and implementing effective training programs, which have bolstered member sales. The good performance from MLM demonstrates that the division's growth momentum is sustainable. Meanwhile, revenue from the wholesale division ticked up marginally by 2.9% but PBT slipped 13.6% as the Chinese medicated halls cut down on orders when consumers grew cautious amid economic uncertainty. In the retail division, turnover and earnings were lower by 8.1% and 55% respectively due to  a  slower  economy  and  the  opening  of  seven  new  outlets  in  the  previous  financial year, which have yet  to make any positive contribution despite incurring high overhead costs.  Other  divisions  recorded  14.1%  and  52.4%  growth  in  revenue  and  earnings,
largely attributed to a RM0.57m one-off compensation arising from the early termination of a sales contract by customers.  

EBIT margin stays flat. EBIT margin remained flattish at 21.6% as higher margins from the  MLM  and  other  divisions  were  offset  by  weaker  margins  from  the  wholesale  and retail segments.  

Maintain  NEUTRAL.  Given  that  Hai-O's results were in line with estimates, we are maintaining our FY13 and FY14 forecasts. We also stick with our NEUTRAL call and FV of RM2.16.

 Source: OSK