Hai-O entry into property may add risk: OSK

Hai-O Enterprise Bhd's venture into the property business will add more risk to the group, given that its multi-level marketing (MLM) business is still trying to recover locally, says OSK Research.

"While the venture may help generate future earnings and reduce its reliance on the more volatile MLM business, our concern is that this will further divert its focus on its current businesses and add risk to the group if not executed properly," it said in its research note today.

The research house said apart from the risk of venturing into a non-core property business, in which Hai-O has no expertise, the group's MLM business was still struggling from the impact of more stringent rules on direct marketing.

The property venture is the second non-core business Hai-O has gone into after it diversified into the heat transfer technology in August 2009.

OSK said given the recovery in buying sentiment among Hai-O's members was taking longer than expected (members were ordering less even for the saleable products), the management believed the MLM division would need more than six months to recover.

"Nonetheless, the Hai-O management is confident that with all the measures put in place by the task force set up to beef up performance, its MLM division would regain momentum and continue to drive the group's earnings," it said.

By Bernama