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MLM business continues to drive Hai-O’s growth

Posted on: March 31, 2009

Bernama – Tuesday, March 31

KUALA LUMPUR, March 30 (Bernama) — The multi-level marketing (MLM) division will continue to drive Hai-O Enterprise Bhd’s growth going forward, according to OSK Research.

“Of course, the company’s performance will be hit by the economic slowdown, but the strong and motivated MLM force will help to boost sales of Hai-O Enterprise,” the research firm said today.

For the first nine-month period ended Jan 31, 2009, Hai-O Enterprise’s revenue and net profit grew 25.8 percent and 23.4 percent year-on-year respectively, driven mainly by continued growth of its MLM division.

“Cumulative retail sales grew 4.8 percent year-on-year, boosted by the Chinese New Year festivities while manufacturing sales rose an impressive 109.4 percent,” OSK Research said in a statement.

“Wholesale sales and profit, nonetheless, contracted 7.2 percent and 18 percent year-on-year respectively owing to lower orders, the weakening of the ringgit and higher advertising cost,” it said.

However, a quarter-on-quarter comparison revealed that all key divisions recorded positive sales growth, ranging from 1.3 percent to 19.8 percent, with MLM showing the strongest growth, OSK Research said.

Despite concerns that demand for MLM products may suffer as consumers turned to cheaper alternatives due to the weak economy, the underlying demand for cosmetic and skincare products remained robust, the research firm said.

“That is supported by a good 70 percent of its membership base being made up of women,” it said, adding that Hai-O Enterprise launched its La Praise skincare products early this year.

While many companies have scaled down their advertisement and promotion spending, OSK Research said Hai-O Enterprise has opted for bigger spending to create awareness of its products.

“The company also takes pride in the MLM business and regularly holds motivational talks and seminars to equip members with the necessary soft skills to develop entrepreneurship,” it said.

The research firm said Hai-O Enterprise’s MLM division remained robust given that its higher margin and fast-moving products, like slimming lingerie and water filters, were still selling fast despite the weak consumer sentiment.

“Its membership base also continues to grow steadily by 2,000 to 3,000 per month,” it said.

OSK Research said approval for the launch of Hai-O Enterprise’s MLM products in Indonesia is expected to be received by next month and contribution should start to flow in from its financial year ending April 30, 2010.

“We maintain our financial year 2009 and 2010 earnings forecasts of RM49.6 million and RM50.4 million respectively,” it said. — BERNAMA



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