HLFin – Lim and Tan

• HLF’s performance in Q3 continues to disappoint: net profit fell 22% to $25.385 mln, a sharp contrast from the banks.

• While the contraction of the car hire purchase business is a “reasonable” excuse, HLF’s push into SME sector has clearly not yielded any results.

Loans & Advances, at $6103.53 mln at end Sept’10, are still lower than $6136.99 mln at end’09, which was down sharply from $7412.92 mln at end 2008. And net interest Income dropped 15% to $47.40 mln.

• Assuming unchanged final dividend of 6 cents, full year total will be 10 cents, giving a yield of 3.2%.

• While trading at 0.89x book of $3.46, investors would be better off switching to bank stocks.

• We maintain HLF may be worth a look again at $2.70-2.80.

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