Sunday, April 13, 2008

More On HaiO

TK said:

  • I was initially interested in Hai-O. However, I do not like the 50 Mil investment in property.

    Pu-er tea, Moo Moo, this tea, as far as I know, once being 'goreng' & some cost few thousands ringgit a kati hoo.... dun play play... There are people who buy this tea to keep (investors?), the value will goes up according to its age if it is properly kept.

    Re the herbs, Hai-O looks like improving in its marketing (outlet design, product packaging). I think its competitors will be 'Yu Yan Sang' I was shocked when I see the price of 'Tong Chong Chow' RM400-RM800 per pack.& I beiieve that chinese herbs business is a fat profit margin business.One of my classlmate drove Merz after joining their MLM while I was still in college. But thats before Hai-O listed... How?

Many thanks Unker TK for sharing what you know.

BullBear posted on FusionInvestor chat:

  • HaiO is selling at a low PE (based on ttm-eps). It earns >25% on equity and its net profit margin >10% of its revenue. The arguments centred on its management and its business franchise. IF HaiO continues to perform, those who invested into it would have a return of x% (?5%, 10%, 30%, 50%, 100%), if it unperforms, one might lose y% (?5%, 10%, 30%, 50%, 100%), . Works out the odds (x/y), and see if you like the odds.

    Peter Lynch: "The very best way to make money in a market is in a small growth company that has been profitable for a couple of years and simply goes on growing." The key objective of the investor should be to avoid a major loss, the occasional huge winner will offset a number of small losses." "When the news seem terrible, that's when you make the big money in the market."

My dearest BullBear,

A low PE stock means only one thing and that is the stock is trading on a lower valuation compared to what it is currently earning.

Some simply consider that what is happening is the stock is being ignored in the market despite its impressive earnings.


The market could be wrong and that perhaps this is a stock that's an ignored gem. Yeah, the classical hidden gem and if this is the case, investors who invests in the stock could be rewarded for their stock selection.

However, on the other hand, sometimes the market could be right and that they do sense something is not right within the stock.

And because of this reasoning, I have always realised that a low PE stock does not make a stock a QUALITY stock.

It just means the stock is trading 'cheaply'.

It could be a bargain but it could also be a trap.

In this instance, HaiO is obviously trading cheaply compared to its current earnings.

Now, yes I've raised the concerns on the management and business model.

In every investment reasoning I always evaluate my pros and cons in any investment opportunity.

Yes, HaiO is making tons of money but what's the concerns? What's yours? Well mine are the two simple issue, management and business model.

Main issue here is, are the concerns that I raised legitimate?

Are you comfortable with a MLM business model? Would you invest and buy-and-hold for the long term in such a business?

The issues I raised about the management. Well, did it not happened? Was it not legitimate?