Hai-O foresees good prospects with new technology division

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KUCHING: Multi-level Marketing company Hai-O Enterprise Bhd’s (Hai-O) business prospects is set to move to higher grounds with the development of its technology division.According to OSK Research Sdn Bhd (OSK Research), the group signed an agreement with Beijing Co-Chance Co Ltd, a subsidiary under China Aero Space Corporation (CAST) to develop a high-efficiency system to harness solar energy.

The research house understood that the heat transfer technology,

namely “high intensity heat transfer technology using non-phase change heat pipe (NPC-HP)” had the following unique feature: heat transfer along the heat pipes does not result in a

change in the state of the internal medium within

the pipe. For instance,

liquid remains as liquid while gas remains gas during the heat transfer process.

It added that Hai-O was going into more joint ventures with other parties to market the product and noted that a few trial applications in China and in Malaysia had been proceeding as planned.

The research house observed that this venture was a potential earnings booster given its wide applications and low initial investment cost of about RM 3 million.

Meanwhile, OSK Research noted that Hai-O started its Indonesian multi-level marketing (MLM) business through a joint venture where the group held a 60 per cent stake. The group obtained its official MLM business license in August 2009 but would only officially launch it in April 2010.

The total investment of US$0.5 million had been utilized and the group did not expect any major capital expenditure in the future given that the basic infrastructure was now in place.

Presently, the group had a total of 65 outlets, including 10 franchise stores with a cumulative floor space of 68 000 square-feet in Malaysia.

On the group’s future expansion plans, the research house pointed out that the group planned to open three to five new outlets annually and increase the number of house brands which would contribute higher margins.

Therefore, the research house raised the earnings forecast for the company upwards by 15 per cent to 26 per cent. The earnings forecast were amounted to RM 72.6 million, RM 85.2 million and RM 100.2 million respectively.

It maintained a ‘buy’ recommendation for its shares at a higher target price of RM 10.55 per share.