HAIO–Fundamental Analysis (9 Oct 2015)

Fundamental Analysis as of FY15

Excel – http://1drv.ms/1Minvtf

Latest Financial – Q1 2016 Financial Report (23 Sep 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4875845

Peer Comparison

FY16 Q1 Results Highlight:

  • YoY, 1Q16 revenue grew 11.2% to RM55.4m thanks to strong performance in MLM division (+29.4%) as the strategy of focusing in ‘smallticket’ items bore fruits. However, the wholesale division sale recorded a decline of 21.5% due to the weak consumer sentiment and GST implementation. Operating profit increased by 6.2% to RM8.7m due to the strong performance in MLM division. As a result, a result, net profit grew 6.5% to RM6.6m. (Kenanga 25 Sep 2015)
  • QoQ, 1Q16 revenue slid 21.4% to RM55.4m largely due to the swing in sales of the wholesale division as customers stocked up in anticipation of GST implementation. Sale was also weaker in the MLM division due to the Ramadhan fasting month as well as the incentive trip promotion campaign that boosted sales in 4Q15. As a result, net profit fell 29.5% to RM6.6m due to the higher base effect in the previous quarter. (Kenanga 25 Sep 2015)

Valuation:

  • Absolute EY%
    • Historical EY%
      • Trailing:
        • FY15 (EPS: 0.152) – 2.484 (Uncertainty Risk: MEDIUM)
        • R4Q (EPS: 0.156) – 2.544 (Uncertainty Risk: MEDIUM)
      • Forward:
        • FY16 (EPS: 0.16 ± 5%) – From 2.482 to 2.743 (Uncertainty Risk: MEDIUM)
        • FY17 (EPS: 0.193 ± 5%) – From 2.988 to 3.303 (Uncertainty Risk: LOW)
      • EPS applied to reach the current stock price (2.3): 0.141
    • Absolute PE
      • Trailing:
        • FY15 (EPS: 0.152) – 2.452 (Uncertainty Risk: MEDIUM)
        • R4Q (EPS: 0.156) – 2.511 (Uncertainty Risk: MEDIUM)
      • Forward:
        • FY16 (EPS: 0.16 ± 5%) – From 2.450 to 2.708 (Uncertainty Risk: MEDIUM)
        • FY17 (EPS: 0.193 ± 5%) – From 2.950 to 3.260 (Uncertainty Risk: LOW)
      • EPS applied to reach the current stock price (2.3): 0.143
    • Industrial Avg. EY%:
      • Trailing:
        • FY15 (EPS: 0.152) – 2.36 (Uncertainty Risk: HIGH)
        • R4Q (EPS: 0.156) – 2.42 (Uncertainty Risk: HIGH)
      • Forward:
        • FY16 (EPS: 0.161 ± 5%) – From 2.36 to 2.61 (Uncertainty Risk: MEDIUM to HIGH)
        • FY17 (EPS: 0.174 ± 5%) – From 2.56 to 2.83 (Uncertainty Risk: MEDIUM)
  • Absolute DY%
    • Trailing:
      • FY15 (DPS: 0.15) – 4.192 (Uncertainty Risk: LOW)
      • R4Q (DPS: 0.15) – 4.192 (Uncertainty Risk: LOW)
    • Forward:
      • FY16 (DPS: 0.098 ± 5%) – From 2.607 to 2.881 (Uncertainty Risk: MEDIUM)
      • FY17 (DPS: 0.114 ± 5%) – From 3.035 to 3.354 (Uncertainty Risk: LOW)
    • DPS applied to reach the current stock price (2.3): 0.082
  • 5-Y DCF:
    • Good Scenario (8.0% – 10.0%): From 2.86 to 3.06 (Uncertainty Risk: LOW to MEDIUM)
    • Base Scenario (5.0% – 7.0%): From 2.59 to 2.77 (Uncertainty Risk: MEDIUM)
    • Bad Scenario (2.0% – 4.0%): From 2.34 to 2.50 (Uncertainty Risk: MEDIUM to HIGH)
    • At current price (2.3), based on RDCF, assumption of FCFF growth rate in the next 5 years is 2%.
  • In my opinion, fair value of HAIO range from 2.7 to 3.0.

HAIO-FY16-Q1

Going Forward:

  • Weakening of MYR against USD currency will increase the cost of import purchases.
  • Weakening domestic purchasing power and high costs of living, resulting consumers more cautious in spending.
  • Despite the current slump in its earnings, coupled with the possibility of longer-than-expected effect from the strategy shift, HAIO’s attractive dividend will be the main catalyst for the stock.
  • I will continue to hold and accumulate HAIO as I believe that HAIO has the ability to overcome the challenges ahead.

At the time of writing, I owned shares of HAIO.

4 thoughts on “HAIO–Fundamental Analysis (9 Oct 2015)

  1. I try your recommended online tool with the following input (3-Y case):

    Ending value: 3010 (= 2340 + dividends + gains)
    Beginning value: 2340
    Number of years: 3

    CAGR = 8.755%

    Since we collect dividends in different dates, I think it will be more appropriate to consider their time-weighting effect. So, I calculate the internal rate of return in Excel with the following ex-dates and dividends:

    For 3-Y case:

    2012-10-09 -2.06
    2012-11-14 0.07
    2013-02-06 0.06
    2013-11-14 0.08
    2014-02-10 0.04
    2014-11-12 0.1
    2015-02-12 0.04
    2015-10-09 2.34

    IRR = 10.9% p.a

    Liked by 1 person

  2. Thanks for your HAIO analysis sharing!

    I have a question on page 28. How did you calculate CAGR? Did you consider dividends in the calculation?

    Like

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