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Hai-O to ride on technology division
Oct 27, 2010
Source: The Edge Financial Daily
 

KUALA LUMPUR: Hai-O Enterprise Bhd, which has chalked up strong earnings growth from its multi-level marketing (MLM) business over the past few years, has decided to focus on its technology division now.


Tan Kai Hee, Hai-O group managing director, said the technology division might overtake its MLM division as Hai-O’s main revenue contributor in the near future with the commercialisation of several industrial products currently in trial runs.

He said the technology division, operating under Hai-O Energy (M) Sdn Bhd, had developed four prototypes: an industrial water boiler, infra-red mini-boiler, air handling unit heat pipe heat exchanger, and economiser. Hai-O had invested RM4 million in the research and development of the products.


Tan said the first to be launched in the next few months would be the industrial water boiler, with an estimated price of RM500,000. He added that the price was believed to be half that of similar types in the market.

“There may not be significant profit from the boiler for the current financial year [ending April 30, 2011], but you should be able to see the results next year [FY2012]” he told the media after Hai-O’s AGM yesterday.


However, he said that stepping up its technology division did not mean that its MLM division was beginning to fade, as Hai-O Marketing Sdn Bhd, among others, continued to strengthen its distributor base by streamlining education and training programmes on product knowledge as well as intensifying promotional campaigns.

Hai-O saw its net profit plunge nearly 58% to RM7.8 million from RM18.46 million a year ago. Revenue shrank over 60% to RM54.75 million from RM148.57 million due to the lower contribution from its MLM division.


Hai-O’s MLM division was affected by the amendment of the Direct Sales Act, which emphasises more stringent rules on member recruitment.

Hai-O’s share price has been on a downhill after the amendment of the Direct Selling Act, tumbling from a high of RM4.76 in March to a low of RM2.94. It closed at RM3.10 yesterday.


Tan revealed that Hai-O’s 2Q earnings were unlikely to recover, simply because the MLM division usually has lower sales during the fasting month, which fell in August. However, he is still positive about the MLM division.

“Revenue per month is still above RM10 million. This shows it is still normal and our [sales] trend is still there,” said Tan when commenting on the prospects of its MLM division.


Tan said Hai-O considered the tightening measures “a good sign” as it imposes heavier penalties on those who do not abide by the new rules.