Stringent ruling, affecting MLM division. Hai-O has recently complied with a more stringent Direct Selling Act (DSA), which took effect in Apr 10. Coupled with an increasing interest rate environment, management expects this to lead to a slowdown in its membership recruitment drive in the next 3-6 months. The amended DSA requires greater transparency from MLM members and involves additional protocols to comply with, which led to a temporary disruption in the operations of the existing MLM members. This is expected to resume to normal in 6 months. Management does not discount the possibility of members dropping out of the company as a result of the changes, and highlighted that total MLM members may even drop on a yoy basis. We currently project net membership to be 0/mth in FY11 (total FY10 members: 140,000) and net membership growth of 1,000/mth in FY12.
Hai-O Enterprise Bhd : Short-term Pain For A Longer-Term Sustainable Gain - 29/6/2010
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