Thursday, September 30, 2010

The Good: Hai-O Enterprise Bhd

Well, I've been away from this for quite some time (holiday you might call it) partly because I've buzzing around with my another hobby, photography which uses my right hand brain a lot. So it's not that easy pulling it back to the left or 50:50 I suppose. Using the right-sided of the brain to think of all these sometimes does show me the other side picture. I wouldn't call it a better view but rather an extra view. So these are what I see from the right brain.

Alright, as you might see, I've downgraded Hai-O to Good. I just thought about this 2 days ago and the quarterly result announced just few hours back might just confirm it. I think, it has lost its competitive advantage in its MLM division. Okay, it is partly due to the stricter rules by the government which I really welcome to be honest. But it is more than that. Looking back at its MLM structure there are some noticeable flaws in it. First is its product. Not to say its products aren't good just that they are products with high life cycle. How often would you replace you water filter or corset? (Not 100% sure about corset cause I don't wear one). Unlike Amway who are selling health care products, Hai-O existing consumers won't return and purchase again unless they got a new member. Yes, filtered has to be replaced all 6 of them periodically but come on Malaysian, are we gonna follow that.

So how does it able to grow so quickly few years back? I've say that the products help them but not just that. The marketing plan as well. Their previous marketing plan allows their existing members to recruit new members quickly which are abused by some putting their downline into trouble. On the other hand these people are exploiting other people's greed. Don't get me wrong, I am still a believer of MLM and this industry does grow and contribute. But like many good ideas, it can be engineered to so something it wasn't intended at first just like how E=mc2 turns into an atomic bomb. Kudos to Hai-O realize this problem is not quick enough. It has hurt its reputation and it is not going to be easy to recover from here. Of course some of its CDM (okay it means top sales if you're aren't familiar with MLM) have been terminated which I think is good but...yea..late.

So what they are currently doing now is to clear up their "unfortunate" members piled inventories as required by the new Act. To be honest, I can't say that I pity them. It is just like those who lost monies in the stock market because of greed. Yea...they might felt cheated in a way...but man...come gotta make it real hard to be cheated. And it is aren't cheating anyway. It is pure greed. Joining an MLM company is like investing in a business venture. You gotta do all the necessary work as a business person.

What do I think of this? This is a temporary setback of course BUT different from most setback. It'll start from a new base. In short a restart. This is not a good news for the current shareholders. But I am still confident they'll be able to sail through but it won't be as great as it once were.

MLM contributes about 90% of Hai-O revenue that's why I talk about it a lot. But there is another division about Hai-O which makes me a little uncomfortable. Hai-O Energy. I think they have found a very promising technology and are in the process of patenting them.....and also,,,they might manufacture products out of this as well. Which is Not Good. Selling patent means existing players can buy their patent and compete against them. Not a very good idea since they have no experience in doing this. The recent MoU with Utar might means 2 thinks, continuing RnD or manufacture it. So it is good to keep an eye on this development.

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