Table of Contents

1.0 HAI-O
ENTERPTISE
BERHAD..
.2
1.1
COMPANY
PROFILE
2
1.1.1COMPANY
BACKGROUND.
2
1.1.2 VISION, MISSION & CORPORATE VALUES..
..3
1.1.3
BOARD
DIRECTORS.
..5

OF

1.1.4
BOARD
MEETING
13
1.1.5
CORPORATE
STRUCTURE.1
4
1.1.6
BUSINESS
ACTIVITIES
..15
1.1.7 AUTHORIZED
CAPITAL.....................................................................................17
1.1.8 PAID-UP CAPITAL..
.....17
1.2
GENERAL
ENVIRONMENT
ANALYSIS18
1.3
TASK
ENVIRONMENT
ANALYSIS.21
1.4
SWOT
ANALYSIS
24
1

1.5
TOWS
ANALYSIS
25
1.6
RATIO
ANALYSIS
..26
1.7
STRATEGIC
DIRECTION.
31
1.8 OTHER RELEVANCE
INFORMATION32
2.0 CONCLUSION.
...38
3.0
REFERENCES.
.39
APPENDIX

1.0 HAI-O INTERPRISE BERHAD

1.1 COMPANY PROFILE
1.1.1 COMPANY BACKGROUND
Hai-O Enterprise Berhad was the first traditional healthcare company listed on Bursa
Malaysia Securities Berhad since 1996. Hai-O was established in 1975, and has become a
famous and established household name in Malaysia ever since. Hai-O offering a wide range
of complementary medicines, medicated tonic, wellness, beauty and healthcare products and

clinical services. Providing the superior quality healthcare products at reasonable prices is
always Hai-O business philosophy.
From a humble beginning with a small start-up capital, Hai-O has over the years been
resilient to ride through the many business challenges to emerge stronger now on an equity
base of more than RM200 million. Its success had been honoured by various prestigious
awards including the Forbes Awards (2007-2010).
Hai-O Group has five principal business which involves wholesaling, retailing, multilevel marketing, pharmaceutical manufacturing and Chinese medicinal clinics. For over three
decades, Hai-O had honed its expertise in building extensive and efficient distribution
network and has successfully gained its market leadership in Malaysia.
Peking Tongrentang (M) Sdn Bhd, a joint venture company between the worldrenowned Beijing Tongrentang and Hai-O has started its business in Kuala Lumpur since
2002 and achieved remarkable performance in offering Traditional Chinese Medicine (TCM)
Consultation services and high quality herbal medicines to the public.

1.1.2
i.

VISION, MISSION & CORPORATE VALUES

VISION
Hai-O aim to become the premier healthcare company in Malaysia and thereby

bringing the greatest value and pride to their customers, business partners, employees and
shareholders. This explained that Hai-O vision of being the leading healthcare company
are much focused on delivering value to each key element that make up their business,
internally and externally.

ii.

MISSION
Hai-O genuine interests in healthy culture boost their spirit to promote humans well-

being with the mission statement that reads: We are committed to promoting healthcare
culture and improving humans well-being.

iii.

CORPORATE VALUES
There are 7 core values in Hai-O:
1) Social Responsibility
- Hai-O strives to repay society by helping those in needs through actions and
monetary support.
2) Excellent Services
- Hai-O strives beyond customers expectations to give excellent quality
products and superior service.

3) Attitude
- Hai-O strives to sustain a positive attitude in every dimensions of the business
at any circumstances it faces.
4) Growing
- Hai-O strives to capitalise on its competitive advantage and knowledge to
ensure continuous improvement and growth.
5) Unity
- Hai-O strives to unite its organization as one big family in Malaysian culture
of different races to achieve its goals in the challenging business world.
6) Loyalty
- Hai-O strives to be loyal to its business partners and its commitment to convey
good results to the customers as well as the shareholders.
7) Learning
- Hai-O strives to build a knowledge-based working environment by collecting
its resources together to achieve goals to educate consumers on healthcare and
4

to contribute to the research and development in the biotechnology and

pharmaceutical science.

1.1.3

BOARD OF DIRECTORS

1. Y. BHG. TAN SRI OSMAN S CASSIM

(Chairman, Senior Independent Non-Executive Director)

Y. Bhg. Tan Sri Osman was graduated from University of Malaya in Singapore with a
Bachelor of Arts (Honours). In 1970 and 1984, he attended the Advanced
Management Programmes conducted respectively by the New Zealand Administrative
Staff College, Wellington and the Harvard Business School in Boston. Tan Sri Osman
has extensive experience in the public sector having served as a member of the
Malaysian Administrative and Diplomatic Service for 30 years.

Tan Sri Osman served as Director-General of the Public Services Department

Malaysia from 1980 up to his retirement in 1985. In 1985, he was appointed National
Executive for Malaysia and Brunei of the General Electric Technical Services Co. Inc.
(USA) and subsequently in 1988 as National Advisor to the General Electric
International (USA) until 1993. Tan Sri Osman had served as a board member and
chairman of Southern Bank Berhad since October1990 up to his retirement on 18
February 2005. In 31 January 2005, Tan Sri Osman was appointed to the Board and as
Chairman.
2. TAN KAI HEE

(Managing Director Non- Independent)

Mr. Tan Kai Hee is the father of Mr. Tan Keng Kang, who is the Executive Director
and Group Chief Operating Officer of Hai-O. Mr. Tan Kai Hee, a well-known
businessman has more than 39 years of commercial experience in the trading. Mr. Tan
is also one of the founders, main policy and decision-makers of the company.
Mr. Tan Kai Hee is the founder of the Malaysia-China Friendship Association
(PPMC: Secretary-General), Malaysia-China Medicine & Health Product Association
(MCMHPA: President), and Malaysia-China Chamber of Commerce (MCCC:
Honorary President) and Malaysia-China Culture & Arts Association (PKKMC:
President). Mr. Tan is also the President of the Federation of Chinese and Medicine
6

Dealers Association of Malaysia (FCPMDAM) and a Director of the Malaysia China

Business Council.
In 30 August 1975, Mr. Tan Kai Hee was appointed to the Board as Managing
Director Non-Independent. Mr. Tan is also a Director in Hai-O Raya Bhd and holds
directorship in several private limited companies.

3. Y. BHG. DATIN SUNITA MEI-LIN RAJAKUMAR

(Independent & Non-Executive Director)

Y. Bhg. Datin Sunita Mei-Lin Rajakumar was graduated from University Bristol in
1990 with a degree in Law (LLB Hons).
Datin Sunita qualified as a Member of the Institute of Chartered Accountants of
England and Wales in February 1994. Her working experience included 4 years in
Ernst & Young, London and 6 years at RHB Investment Bank, Kuala Lumpur, before
she established her own firm, Artisan Encipta Ltd, to manage a government-ownwd
foreign technology venture fund from 2002 to 2008.
In 5 January 2009, Datin Sunita was appointed to the Board of Hai-O. She also
an Independent Non-Executive Director of Hibiscus Petroleum Berhad and chairs the
Audit and Risk Management Committee.

4. CHOW KEE KAN @ CHOW TUCK KWAN

(Independent Non-Executive Director)

Mr. Chow Kee Kan is an approved auditor and chartered accountant. He has started
his own practice in 1984.
Mr. Chow has more than 35 years of practical experience in accounting,
auditing, taxation and corporate management consultancy. He is presently a Trustee of
the Malaysia Accountancy Research and Education Foundation (MAREF). In 1 April
2011, Mr. Chow was appointed to the Board and currently also an Independent NonExecutive Director of Cocoaland Holdings Berhad. He is also a member of the Audit
Committee and Nominating Committee.

5. TAN KENG KANG

(Non-Independent Executive Director)

Mr. Tan Keng Kang is the son of Mr. Tan Kai Hee who is the Managing Director of
Hai-O. He was graduated from Beijing University, China, major in International
economics in 1997. He joined Hai-O as an Operations Executive on 1 August 1998,
mainly to support the operational activities of Hai-O's marketing arm.
Between 1999 and 2013, he has been promoted as a Sales Manager and Director
of Chop Aik Seng Sdn Bhd, and was appointed to the Board in 2012 and is a member
of the Risk Management Committee. Recently, he also holds directorship in some
private limited companies. In 1 May 2014, Mr. Tan was appointed as the Group Chief
Operating Officer. He is involving in the strategic planning at Group level and asists
the Group Managing Director to manage the operational activities and oversees the
business development of Hai-O Group.

6. CHIA KUO WUI

(Non-Independent Non-Executive Director)

Mr. Chia Kuo Wui graduated from Curtin University Western Australia, with Bachelor
of Commerce, Accounting in 2001.
In 2006, Mr.Chia joined the Department of Planning and Investor Relations in
Hai-O Corporate and held key positions in several Hai-O Group of companies. He
also holds directorship in several private limited companies.
In November 2008, Mr.Chia was appointed to the Board and currently holding
the position of Non-Independent Non-Executive Director.

7. LIM CHIN LUEN

10

(Non-Independent Non-Executive Director)

Mr. Lim Chin Luen has involved in the dealing of Chinese traditional medicine and
herbal products business for more than 15 years. He was appointed to the Board on 16
December 1997 and redesignated to Non-Independent Non-Executive Director on 1
July 2012.

8. TAN KIM SIONG

11

(Independent Non-Executive Director)

Mr Tan Kim Siong was graduated from University of New Brunswick of Canada with
BBA and MBA.
He was setting up his own logistic firm in 2006. Meanwhile, he also involved in
housing development in Negeri Sembilan. After few years, he has acquired several
companies to expand his business as a fully-integrated logistics provider.
Mr.Tan was appointed to the Board as an Independent Non-Executive Director
on 8 January 2014.

1.1.4
i.

BOARD MEETING
The Board meets at least four times a year, or once in every quarter for a formal
schedule of matters reserved for the Board. Additional meetings are held as and when
required.
12

ii.

Senior management staff will be requested to attend Board meeting to brief and
update the Board on the financial performance and affairs of the Company and its
main business segments or any other important strategic issues, corporate proposals or
key business plans.

iii.

Relevant and sufficient information and documents such as the Notice of Board
Meeting, full agenda and the supporting Board papers shall be provided to the Board
members prior to each Board meeting to enable Directors to make informed decisions
and to properly discharge their duties.

1.1.5

CORPORATE STRUCTURE

Wholesale
Division

Hai-O
Medicine
Sdn.Bhd

Multi-level
Marketing
Division
Sahajidah HaiO Marketing
Sdn.Bhd

Retail Division

Hai-O Raya
Bhd.

Manufacturing
Division

SG Global
Biotech
Sdn.Bhd

Others

Sea Gull
Advertising
Sdn.Bhd.
13

Kinds
Resource
Sdn.Bhd

Hai-O Credit &

Leasing
Sdn.Bhd

Grand Brands
(M) Sdn.Bhd

Chop Aik
Seng Sdn.Bhd

Sri Pangkor
Credit &
Leasing
Sdn.Bhd.
Hai-O
Properties
Sdn.Bhd.

Yan Ou
Holdings (M)
Sdn.Bhd

PT Hai-O
Indonesia

o Peking

Tongrentang
(M) Sdn.
Bhd

QIS Research
Laboratory
Sdn.Bhd.

Subsidiary company
o Joint Venture company

There 5 divisions under cooperate structure of Hai-O company. Which are wholesale, multilevel marketing (MLM), retail, manufacturing, and others division.
All of these companies are subsidiary companies, except Peking Tongrentang (M) Sdn.Bhd,
which is under retail division, is a joint venture company of Hai-O Sdn.Bhd. This company
provides Chinese consulting clinic service, meanwhile, it manufacturing the finest traditional
Chinese pharmaceutical products by using raw materials which are well known for their
effectiveness.

1.1.6

BUSINESS ACTIVITIES

There are 6 main business activities in Hai-O Sdn.Bhd, such as

1.
2.
3.
4.
5.

wholesale
Multi-level marketing (MLM)
Retailing
Pharmaceutical manufacturing
Chinese consulting clinics
14

6. Laboratory
First of all, the wholesale division of Hai-O Sdn. Bhd has agency rights to import and
distribute more than two hundred of branded products from China in Malaysia. These
products include many types of Traditional Chinese Medicines, teas, wines and consumer
products. This division has developed multi-distribution channels so that can be able to
access to Chinese medical halls, hypermarkets, supermarkets, convenience stores, and food &
beverage outlets. The efficiency of delivering products in logistic services has build a good
reputation and trust from our valued customers.
Secondly, Multi-level Marketing was established in 1992, Sahajidah Hai-O Marketing
(formerly known as Hai-O Marketing Sdn Bhd) has strength on a strong partnership with its
distributors. Today, the company is one of the leading local multi-level direct selling
companies in Malaysia. The company strongly believes in and is committed to providing a
comprehensive support and reward program. Thus, an increasing number of new distributors
and the rapid growth can be seen in the productivity by the distributors.
Thirdly, in the aspect of retailing, Hai-O has strong retail chain with over 70 Hai-O
Stores in major cities and towns across the country. To maintain the quality of service, these
stores are staffed by professional herb masters to provide advice on herbs and instructions to
customers. Not only these, some of these stores are also providing integrated medical services
by making available in-house consultations by qualified TCM physicians.
Forth, for pharmaceutical manufacturing, the SG Global Biotech Sdn Bhd had
complied with Good Manufacturing Practice (GMP) standard in Malaysia in 1994. Beside
this, we also set up an analysis laboratory arm QIS Research Laboratary Sdn Bhd certified
with Good Laboratory Practice Standard (GLP) to perform various testing services to meet

15

the stringent quality controls. Yet we have successfully acquired both HACCP & ISO
22000:2005 certifications for our Manufacturing Division of Food Products in 2012. The
company is also actively involved in R&D activities to ensure high quality and innovation in
its products.
Fifth, for Chinese consulting clinics, Peking Tongrentang (M) Sdn Bhd is a joint
venture company between Hai-O and Beijing Tongrentang Co Ltd in 2002. There are 3
outlets of Chinese consulting clinics, Kuala Lumpur, Petaling Jaya and Penang. All of these
outlets provide medical consultations by qualified traditional physicians. Tongrentang is also
famous for manufacturing the finest traditional Chinese pharmaceutical products by using
raw materials which are well known for their effectiveness.
Last but not least, the QIS Research Laboratory Sdn. Bhd is a full service analytical
laboratory, it offers testing services in the areas of the microbiology and chemical analysis in
traditional medicine and food products. The laboratory is run by a team of qualified chemists,
micro-biologists and well experienced supporting staff to meet client requirements.

1.1.7

AUTHORIZED CAPITAL

16

The Authorized share capitals for Hai-O Group was 500,000,000 ordinary shares where each
of shares was RM 0.50.

1.1.8

PAID-UP CAPITAL

Hai-O Group issued and paid up capital was 202,190,282 ordinary shares where each of
shares was RM 0.50.

1.2 GENERAL ENVIRONMENT ANALYSIS

17

General environment is the external environment which can affect an organizations business
activities and performance but cannot control by them. There are 5 major factors have
significantly contributed to Hai-Os business operations and strategies, such as political &
leagal, economic, social, technological, environmental forces.
1. POLITICAL AND LEGAL FORCES
Political forces will affect a company by political pressures and will determine by the
orientations of its ideology of a country. These political and legal forces will influence the
shape the profile of a business environment. Political forces concern the influence of political
parties, leaders and pressure groups such as civil society organization and trade unions. These
forces negotiate or dictate policies that may change the course of business in an industry.
In Malaysia, the Ministry of Health requires all medicines marketed in the country to
be registered by the Drug Control Authority. Thus, all manufacturers, importers and
wholesalers are required to the license. So it will create higher entry barriers to enter
medicine industry. It helps Hai-O to lower the intensity of competition. As Hai-O had
complied with the licenses, it has strong advantage to grow and continue to be the market
dominant in the traditional medicine industry.

2. ECONOMIC FORCES

18

Economic factors such as the level of employment, rate of inflation, rate of interest,
demographic changes, and fiscal and monetary policies will affect the business strategy and
the performance of the company. For the Malaysian economy, the external environment has
affected the overall growth performance of the economy going forward.
Malaysia is currently facing with the weaker regional currencies, escalating operating
costs and tight labour conditions, which has added challenges to the business environment.
However, although the external environments are weak, the Malaysian economy continued to
expand in 2013, driven by the continued strong growth in domestic demand, so the Hai-O
Group continued to deliver good financial results in 2014 as Hai-Os employees have done
many initiatives to achieve effectiveness and efficiency of the operation and management.

3. SOCIAL FORCES
The social environment of a business can be integral to its success or failure. Most companies
analyze the population growth and age structure to analyze which factors affecting customer
needs and size of the market. The social factors such as lifestyles, education level, buying
habits, health consciousness, social classes and etc can affect consumers attitudes, opinions
and interests.
In recent years, Malaysian lifestyle has shift towards wellness and self-administered
healthcare. Many consumers have knowledge in consuming foods and beverages to control
healthy eating habits. Which mean it has open up opportunities for Hai-O to modify its
strategies and product offerings to suit the demand of the market.

4. TECHNOLOGICAL FORCES
19

Technological forces is the most important factor affecting businesses all over the world in
the same industry. The rapid change of development of technology requires quick reaction by
businesses in order to survive in an emerging competitive environment and keep up with new
trends and innovative services which other competitors might be offering.
These technologies can improve the efficiency and productivity of a company. It also
can improve the quality and quantity of the products to fulfill the needs of customers.
In this aspect, Hai-O strives to improve the quality and its product line and taking
traditional medicine up to the level of the mainstream medicine today. The quality of the
products will increase the trust from the customers.

5. ECOLOGY FORCES
Environmental force can also be ecological and environmental aspects such as weather,
climate, and climate change, which may affect industries in some way. While Hai-O strives to
grow profitably, Hai-O still committed to be a socially responsible company to help to create
a great workplace, to support eco-friendliness and to be responsive to customers
expectations in healthcare and wellness.
Hai-O is adopting eco-friendly lifestyle such as 3Rs practice such as reduce, reuse, &
recycle. Hai-O also started to support eco-friendly programme by using energy-saving
lighting and use short message service (SMS) to remind MLM distributors of membership
renewal so as to reduce our carbon footprint. Nevertheless, Hai-O also selling
environmentally friendly products such as Bio-Cleanz Multi Purpose Household Product
Series and JTX Airtracker which are no harm to the environment.

20

1.3 TASK ENVIRONMENT ANALYSIS

Task environment analysis is the analysis of the external environment which directly affects
the organization from attaining business goals. Task environment analysis can be done on
Hai-O Enterprise Berhad by using Porters Five Forces Model. Porters Five Forces Model is
the model that uses five forces to determine the profitability of an industry and shape a firms
competitive strategy. The elements in Porters Five Forces are threat of new entrants,
competitive rivalry within the industry, threat of substitute products, bargaining power of
consumers and bargaining power of suppliers.
1. Threat of New Entrants
Traditional Chinese Medicine (TCM) originated in ancient China and has evolved over
thousands of years. TCM plays a good role in the fight against viral diseases, chronic
inflammation, functional disorders, endocrine disorders and other diseases. TCM has been
found to be reasonably effective in treating life-threatening diseases and also effective in
cancer treatment. Consequently, this may infuse a lot of business opportunities that will invite
a lot of emerging business in the industry, making the threat of new entrance high for Hai-O
Company.
The promising global market for TCM especially when China has become an open
market has led to more TCM providers will compete in the future, exploiting the opportunity
of lower bargaining power of its suppliers. Wide acceptance of TCM on a global level will
allow achieving economies of scale and higher return on investments. Such attraction will
lure more businesses into the industry. Moreover, opening the TCM clinics also relatively
easy where the clinics do not require expensive high end diagnostic machines and equipments
and are able to operate at smaller buildings and smaller land base. This low capital
investment will definitely put a low barrier to new entries to the TCM business.
21

2. Competitive Rivalry within the Industry

Traditional chinese medicine industry was a broad industry with a highly competitive and
aggressive market. Within the dynamic of the industry, the ownership of patents and specific
rights sometimes can neutralizes competition in the market place, but there still a possibility
for higher level of competition. In the industry, Hai-O has yet to face an equally strong rival
in the local market scene. There are not many TCM providers apart from the local
neighbourhood practitioners with small practises and family businesses that sell unbranded
TCM product. Although the demand of TCM increasing, the rivalry within the industry in
Malaysia currently is relatively low.
3. Threat of Substitute Products
TCM competitive products are includes modern medicine and other type of traditional
medicines. Therefore, threat of substitute products is relatively high. Tremendous research
and development were performed in the modern medicine industry that has resulted in more
effective and safer treatment. Besides, in most cases, modern medicine works faster in term
of diagnosis and treatment than any other type of medicine. Therefore, people only tend to
resort to TCM and other traditional medicine as an alternative rather than primary form of
treatment.
Oppose to other traditional medicine, there is no doubt that TCM has the superiority
due to the fact that its research has been well organized, documented and updated for the last
several centuries. TCM non-medicinal therapies and acupunctures are proven effective and
are better received than other traditional medicinal therapies. This is the platform that the
Hai-O Group grew on in building its name into becoming a corporate identity. In addition, the
government huge support on the local healthcare industry is also a cause of threat. As

22

Malaysia is rich with its own rainforest herbal treasures that are identified to have medicinal
value, the threat of substitute products for TCM are definitely on the high level.
4. Bargaining Power of Consumers
As the TCM are widely accepted globally, the demands for Chinese herbal products are
increases. As demand rise, it reflects the increasing power of consumers. In the local market,
there still exists a lower switching cost for consumers even though there are only a few
competitors that compete with Hai-O. This happen because the increased market demands for
the product has resulted in large imports. As a result, a lot of TCM products exist in the
market with lacking brand differentiation and most of them appear similar in nature and
appeal. Therefore, the low brand differentiation creates opportunity for consumers to switch
from one brand to another.
Moreover, the trend of today people to adopt an active lifestyle, coupled with higher
education and access to information has led to increasing individual knowledge about
healthcare products. Normally, these health-conscious people can be very selective and
evaluative in buying TCM products. Consequently, they create high bargaining power.
5. Bargaining Power of Suppliers
Hai-O products, especially the raw material are mostly supplied by suppliers from China.
There are more than 3,000 enterprises are engaging in traditional Chinese medicine
processing in China. Thus, there exists possibility for Hai-O to switch supplier at a low cost,
therefore makes the bargaining power of supplier low. However, the bargaining power of
supplier in the service sector of TCM is relatively high, resulting from the regulations where
TCM practitioners are required to have a license to practise. Hai-O does offer such services in
its TCM clinics and has to acquire the physicians from China, due to the fact that there are

23

not many professionally trained local TCM physicians. Thus, it makes the bargaining power
of TCM service suppliers are relatively high.

1.4 SWOT ANALYSIS

SWOT ANALYSIS TABLE: HAI-O ENTERPRISE BERHAD

INTERNAL: STRENGTHS
S1

S2

Strong MLM marketing structure that

suited the Bumiputra market

INTERNAL: WEAKNESSES
W1

Lack of new exciting products

W2

Small market capitalization

W3

Increasing number of competitors

Strong foothold in China

S3

Attractive reward scheme and excellent

company support

S4

Own pharmaceutical manufacturing

capacity

EXTERNAL: OPPORTUNITIES

EXTERNAL: THREATS

O1

Globalization

T1

Globalization

O2

Population growth

T2

Natural disaster

O3

New innovative products to enhance

group earnings

T3

New market entrance

T4

Intense price competition

T5

Government Policy

O4

World trade agreement (WTA)

O5 Technological advancement
O6

Weak competitive rivalry within the

TCM industry

1.5 TOWS ANALYSIS

24

TOWS ANALYSIS TABLE: HAI-O ENTERPRISE BERHAD

STRENGTHS
INTERNAL
FACTORS
S1 Strong MLM marketing
W1
(IFAS)
structure that suited the
Bumiputra market
W2
S2 Strong foothold in China

EXTERNAL
FACTORS
(EFAS)
OPPORTUNITIES
O1

Globalization

O2

Population growth

O3

New innovative
products to enhance
group earnings

S3

Attractive reward scheme

and excellent company
support

S4

Own pharmaceutical
manufacturing capacity

W3

WEAKNESSES
Lack of new exciting
products
Small market
capitalization
Increasing number of
competitors

SO STRATEGIES

WO STRATEGIES

S1O2

W1O5

S4O1O3

W2O1O3

O4 World trade agreement

(WTA)
O5 Technological
advancement
O6 Weak competitive
rivalry within the TCM
industry

25

THREATS
T1

Globalization

T2

Natural disaster

ST STRATEGIES

WT STRATEGIES

S1S2T3

W1, T1, T3

S4T4

W3, T1, T3
W3, T4

T3

New market entrance

T4

Intense price
competition

T5

Government Policy

1.6 RATIO ANALYSIS

Ratios
Earnings per share^^(sen)

2013 @ (RM000)
23.86

2014 @ (RM000)
20.46

Return on Sale (ROS)

0.2399

0.2097

Return on Investment (ROI)

0.1574

0.1324

Return on Asset (ROA)

0.4189

0.3439

Return on Shareholders Equity (%)

19.7 %

15.9%

4.0

4.8

Gross margin (%)

39.1%

36.9%

Net margin (%) #

16.0%

16.1%

Current Ratio

# Excluded the one-off gain from disposal of investment properties for computation of Net
Margin (%) for FY2013.
^ Dividends are based on par value of RM0.50 per share.
^^ Calculated based on weighted average number of shares in issue, net of treasury shares.

Ratio analysis is an analysis used to evaluate several aspects of a companys operating and
financial performance in terms of its efficiency, liquidity, profitability and solvency. These

26

ratios over time are believed that can provide an early warning of a potential improving or
facing losses.

1) EARNINGS PER SHARE (EPS)

Net Income
Average Outstanding Share
Year
2013 (RM)

2014 (RM)

Earning per share (EPS) can be calculated by company's profit attributable to ordinary
shareholders and divided by weighted average number of ordinary shares outstanding. It also
serves as an indicator of a company's profitability. Hence, the higher the earning per share
(EPS) of the company indicates the good performance by the company on it profit generation.
In year 2013, the earning per share of the company is 23.86 cent per share. It shown
decrease in value on year 2014 with a value of 20.46 cent per share. So, we can summarized
that the company was less performed on year 2014 compare to year 2013.

2. RETURN ON SALE (ROS)

27

Earning Before Interest and Tax (EBIT)

Revenue
Year
2013

2014

63, 929,754

53,148,617

266,529,238

253,422,385

= 0.2399

= 0.2097

Return on sales shows that how much profit is being produced per ringgit of sales.
The higher value of return on sales ratio indicates the company was efficient on its sales
generating. This ratio provides an alternative to compare on the companys return on sales
over time period to analyze on the trends and it is also can compare with other companies in
the same industry.
In year 2013, the return of sale (ROS) of the company is 0.2399. It shown decrease in
value on year 2014 which is 0.2097. So, as the higher the value, the more efficient on its
sales generating, we can summarized that the company was less performed on year 2014
compare to year 2013.

3. RETURN ON INVESTMENT (ROI)

28

Net Profit After Interest and Tax

Total Assets
Year
2013

2014

48,011,349

40,870,428

304,966,985

308,792,192

= 0.1574

= 0.1324

Return on investment (ROI) can be measured by dividing net profit after interest and
tax with total assets of the year. It is used to measure on the net profit that a companys
management able to earn through the use of the company total assets. It is basically to
measure on how efficient the company was used its total assets to generate the net profit.
Hence, the higher the value calculate on the return on investment ratio illustrate that the
company was efficient in applied of its total assets to generate the net income.
In year 2013, the return of investment (ROI) of the company is 0.1574. It shown
decrease in value on year 2014 which is 0.1324. So, as the higher the value, the more efficient
in applied of its total assets to generate the net income, we can concluded that the company
was less performed on year 2014 compare to year 2013.

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4. RETURN ON ASSETS (ROA)

Earnings before Interest and Tax (EBIT)
Average Total assets (sales of the year +previous year and divided by half)
Year
2013

2014

63,929,754

53,148,617

(304,966,985+289,357) / 2

(308,792,192+304,967) / 2

= 63,929,754

= 53,148,617

152,628,171
= 0.4189

154,548,580
= 0.3439

Return on assets (ROA) is an indicator that shows how profitability the company is in
relative to its total assets. It indicates how efficient the business operation in using the
companys assets to generate earning. It should be noted that the return on assets for public
companies can vary substantially and it is highly dependent on the industry. The higher return
on assets figure is more favorable due to more efficient of a company in managing its assets
to generate the earnings.
In year 2013, the return of investment (ROA) of the company is 0.4189. It shown
decrease in value on year 2014 which is 0.3439. So, as the higher the ROI, the more efficient
in managing its assets to generate earnings, we can concluded that the company was less
performed on year 2014 compare to year 2013.

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1.7 STRATEGIC DIRECTION

According to the TOWS analysis table, there are four strategies which are SO, WO, ST and
WT. Among these four strategies, SO strategies were the most suitable strategies for Hai-O
Company. SO strategies are the combination of the strengths and opportunities from the
analysis of Hai-O Company. SO strategies consist of two strategies that suitable to enhance
the position of Hai-O in TCM industry. These two strategies are targeting the bumiputra
segment and venturing abroad.
In the first strategies, as a big player in the Malaysian market which comprise of
Bumiputra domination, Hai-O has a very strong MLM structure that suited the Bumiputra
market. Since the setting of its MLM division, Malay consumers have constituted a large
segment of its market as well as its sales forces, which has result in a remarkable
transformation for Hai-O as a group. The concept of MLM suited the Bumiputra market well
and the growing population in Malaysia especially Bumiputra was the good reason for Hai-O
to continuously implement the strategy. Achieving reputation among Malay consumers may
change the Group image from previously a mainly Malaysian Chinese trade. Thus, the brand
will be more accessible and well received by other citizen in Malaysia.
For the second strategies, being one of the leading manufacturing companies in
traditional medicine, Hai-O certainty has an opportunity to take advantage upon this growth.
Aside from dominating the local market, the Group also has the opportunity to expand into
new overseas market. Besides, Hai-O also has its own pharmaceutical manufacturing
capacity which creates the opportunity to position its products at a very competitive price
range and at the new market level. The venturing abroad strategies would be the best
strategies to expose Hai-O brand even further as well as promote TCM to a higher level.
Together with the opportunity in new innovative products to enhance group earnings, the

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joint ventures with international companies are seen to widen Hai-Os reach to end users
while creating greater brand and TCM recognition.

1.8 OTHER RELEVANT INFORMATIONS

1. Products Brands
Hai-O wide range of products consists of in-house brands as well as exclusive principals
brands which are well known and recognized internationally.

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2. Awards & Recognition

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Sin Chew Business Excellence Award 2013- CSR Excellence Award

CIO 100 Honouree Award 201

34

KPMG Shareholder Value Award 2011

SAP Awards for Customer Excellence 2011Top 3 Nominees for Best SAP Business One Project

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Best Return To Shareholder Category First Runner UpMalaysian Business CIMA Enterprise Governance Awards 2009

Best Small Capitalisation Company Award(Malaysia Corporate Governance Index 2009) by MSWG

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Forbes Asias Best Under A Billion Award

Top Malaysian Small Cap Companies100

wels 2007

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2.1 CONCLUSION
As a conclusion, Hai-O Group was less performed on year 2014 as compared to year 2013.
The main reason is due to the strong USD dollars against MYR Ringgit. With the strong
USD, Hai-O might face difficulty in sustaining the profitability in this division. The Earning
Per Share (EPS) for Hai-O group is RM 0.2046 per share in 2014, showing the decreases
from RM0.2386 in 2013.
However, since Hai-O is a dominant company among the competitors and has
tendency to expand the companys share market, and based on the high performances on the
previous years, we believe that Hai-O has the ability to overcome the challenges ahead. Thus,
we suggest the company to invest in Hai-O Group.

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3.0 REFERENCES
Hai-O Enterprise Berhad. (2014). Annual report.

HAI-O Enterprise Berhad. (2015). Awards & recognition. Retrieved March 16, from
http://www.hai-o.com.my/awards.php
HAI-O Enterprise Berhad. (2015). Board of directors. Retrieved March 16, from
http://www.hai-o.com.my/bod.php
HAI-O Enterprise Berhad. (2015). Company background. Retrieved March 16, from
http://www.hai-o.com.my/background.php
HAI-O Enterprise Berhad. (2015). Corporate responsibility. Retrieved March 15, from
http://www.hai-o.com.my/corporatesocial.php
HAI-O Enterprise Berhad. (2015). Financial information: 5 years results. Retrieved
March 15, from http://www.hai-o.com.my/5-years-results.php
HAI-O Enterprise Berhad. (2015). Products Brands. Retrieved March 22, from
http://www.hai-o.com.my/products.php
HAI-O Enterprise Berhad. (2015). Vision, mission & corporate values. Retrieved March
16, from http://www.hai-o.com.my/vision.php

Jurevicius, O. (2013). Porters five forces. Strategic Management Insight. Retrieved

March 19, from http://www.strategicmanagementinsight.com/tools/porters-fiveforces.html

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