Haio has margin of safety at current price but not enough.
Has a reasonable moat because other than Eu Yan Sang, as far as I can think off, they are the only other business in this line and with similar business model. Not taking the traditional medicine shops in to consideration of course. But then Eu Yan Sang is listed in Singapore.
One bad investment decision by EYS affected them last year.
EYS business model is slightly higher than Haio though in that they provide TCM services at selected outlets. EYS is also currently diversifying to include western health products. Haio not only have retail outlets business, but is also doing MLM business in SEA + China. The business model is half EYS, half Amway style. With the various measures being implemented by the Group, the Board of Directors is of the
opinion that the prospect of the Group will continue to be profitable in the next financial
year. I went in at RM0.49. Good fundamentals alone do not make a good investment.
At the time that I went in, I estimated that it was at an almost 70% discount off its intrinsic value. Herein lies the value of Margin Of Safety or MOS.
At this discount, how much more lower can it go given the fundamentals?
Remember that the stock will be practically f.o.c. at 100% discount.
I am not saying that there is no danger that I may even lose out. But at 70% discount, that's a level I am willing to bet on.
Tuesday, May 21, 2013
