Senin, 14 Maret 2011

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Anyway, what I say is, the current price drop is likely due to investors concern about its business. So if the market if so efficient, there must be something wrong with the business. I can basically categorize their business into, wholesale and retailing, MLM, energy-thing and the rest which are so-so and not so large. To cut long story short, retailing is doing well and that normally means wholesale is doing well. That heat transfer (or if don't understand energy-thingy) is promising. The rest are the rest. MLM...no so good. So the worry must be the MLM which contributes more than 80% of its sales. All these due to Hai-O pro active measures to restructure its MLM segment to comply with the new DSA ammendment which sounds something like this:
How about the valuation?
Gosh, you gotta love the market don't you if you invest long-term don't ya. Chances are, business "hiccup" or "below expectation" performance are likely to happen within that period. Remember how excited the experts were few months back? And now how depress they look?
Well, I use 3 scenarios. Since the main contributor for Hai-O is from their MLM business - as for now, I take the average industry sales growth rate of 5% (got this by searching Amway on Reuters).

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bugatti veyron ss
bugatti veyron ss
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bugatti veyron ss
Scenario 1
All variables are the same as my previous valuation except I take a more conservative approach by using industry average for sales growth at 5% for the next 5 years. It'll show me RM5.15. Too optimistic?

Scenario 2
Sales take a EXTREMELY bad hit next financial year, sales drop by 50% by growing back to 5% CAGR next 4 years. I get RM3.50. Hmmmm.........

Scenario 3
If you are a bit speculative, maybe you can try wait for the next quarter report which is going to out soon and hope it turns out badly so that you can buy it even cheaper. Anyway, those investment bankers are "predicting" a bad one for the coming 2 quarter.

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bugatti veyron ss
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've taken a look at their MLM business model. They should have no problem with (a) and (b). But clause (c) might give them a little trouble as I know there are member who purchase big loads of stocks...just Google Hai-O Marketing. Clause (d) is the one that is likely impact the earnings and in fact not just Hai-O but all other MLMs that operate in Malaysia.

I take the same view as their management or I shouldn't say that because no matter how many times any one of us calls or email their IR, they are always bullish. But, yea, I have to agree with RHB who somehow seems always bullish as well. Yes, there will be an negative impact on the shorter term but look at the longer term and what (d) could do on the longer term. You'll get quality products + committed members (no one shouting scam...hopefully) = sustainable growth.

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