KUALA LUMPUR: Traditional healthcare company Hai-O Enterprise Bhd plans to focus on building its market in Southeast Asia in the near term after efforts to break into China proved challenging.

“We are facing challenges due to the rules and regulations [for] healthcare food products, with approval from [its] food and drugs administration taking almost a year.

“Also, operating a multilevel marketing (MLM) business in China requires RM100 million as an entry-level sum, and one must have its own factory there to produce the product. The rules are too stringent and there is a huge capital pay-up.

“We are not keen on spending that much. Instead, we will appoint an agent there to import and distribute our products such as traditional Chinese medicinal products,” Hai-O managing director Tan Keng Kang told reporters after the group’s annual general meeting here yesterday.

However, Tan said the appointment would not materialise in this financial year ending April 30, 2017 (FY17).

“So we will pay more attention to Southeast Asia by expanding the Indonesian sector where we have less than 10 products, and investing in Malaysia, our 99% revenue contributor,” he said.

Meanwhile, Tan expects a double-digit revenue growth for the current financial year, driven by its ongoing strategies that include “small ticket” consumer products. This means smaller capital investment by entrepreneurs, e-platform digital marketing to attract younger marketers, and an ongoing rebranding exercise.

Tan said he is also bullish on sustaining a double-digit growth over the next five years with an MLM membership growth every month of up to 5,000, made up mostly of Malays.

In July 2016, Hai-O’s distributor/member force jumped 56.6% to 83,000 from last year’s 53,000.

For the first quarter ended July 31, 2016 (1QFY17), the group’s net profit rose 46.9% to RM9.74 million or 5.03 sen per share, from RM6.63 million or 3.39 sen per share a year earlier, mainly contributed by its MLM and wholesale divisions, while revenue for the quarter strengthened 42% to RM78.66 million, from RM55.38 million.

“Based on our 1QFY17 results, you can project the growth. We expect a double-digit growth for FY17 with recurring income to ensure the growth sustainability from small-ticket products,” Tan said.

In addition, Tan was confident of hitting RM1 billion market capitalisation in three years based on the strategies it employs now.