Hai-O’s results likely to be higher sequentially, annually

KUCHING: Hai- O Enterprise Bhd’s (Hai-O) third quarter of the financial year 2014 (3QFY14) top and bottomline have been expected by analysts to be higher on sequential and year on year (y-o-y) bases.

According to the research arm of Affin Investment Bank Bhd (Affin Research), these are likely to be due to a recovery in demand growth for its big-ticket items and also best-selling products, namely foundation garments, as well as BioVelocity mattresses. Results may also be lifted by resilient sales in conjunction with the Chinese New Year celebration (CNY).

However, while the market may expect a stronger set of 3Q14 results, Affin Research believes the group’s first nine months of 2014 (9M14) year to date (YTD) numbers would still be marginally lower y-o-y, given Hai-O’s weak first half of 2014 (1H14) results, which was affected by weaker demand for its foundation garments.

“We also understand that HaiO delayed its 1H14 promotional activities, pending the launch of an improved version of its foundation garment in 3Q14,” it added.

As such, the research arm says sales for its foundation garments will improve in 2H14 in tandem with the promotional activities.

“Importantly, we believe HaiO’s improved foundation garment business will continue to support the group’s earnings going forward,” it opined, noting that management has already guided for positive growth momentum in 2H14.

All in, Affin Research believes Hai-O’s 9MFY14 results will fall within expectations.

In terms of Hai-O’s dividend payout, the research arm noted that the Group has a minimum payout policy of 50 per cent.

“Nonetheless, the group’s payout ratio was 54 per cent over 2011-12, and in FY13, Hai-O’s final dividend payout was raised to 60 per cent,” it observed.

It further noted that on Feb 10, 2014, the group had declared a single-tier interim dividend of 4sen per share.

While this was 2sen per share lower than in 1H13 mainly due to the weaker earnings, Affin Research is of the view that this is merely a minor setback, with the slack to be made up for in 2H14.

“We believe that management will likely reward its shareholders with a final dividend of at least 10sen per share, bringing FY14 dividend per share (DPS) to 14sen per share, on par with FY13’s DPS.

“Our FY14-16 DPS forecast is revised upwards by nine per cent, 12 per cent and 12 per cent respectively after we factor in a higher dividend payout assumption (63 per cent, 65 per cent and 65 per cent from 58 per cent previously),” it noted.

It further opined that the company could potentially raise its dividend payout in FY15 in conjunction with Hai-O’s 40th year anniversary celebration.