AMWAY (M) Holdings - 4Q12 results in line

Period    4Q12 / FY12

Actual vs.  Expectations  The FY12 net profit (NP) of RM99.8m was in line with the street’s estimate and our forecast of RM97.8m (102%) and RM100m (99.8%), respectively.  

Dividends   A single tier dividend of 10 sen per share and a single tier special dividend of 22.5 sen per share have been declared, bringing the full-year total dividend to 62.5 sen per share vs. our projection of 58.0 sen. 

 This implies a net dividend yield of 5.7% and a dividend payout ratio of 103% of its FY12 earnings.

Key Result Highlights  QoQ, the revenue decreased by 8.4%. This was attributable to a lower distributor productivity driven by the sales and marketing programs implemented in the quarter. However, due to a lesser sales and marketing program spending in the quarter, the PBT was up by 7.3% QoQ. 

 YoY, the 4Q12 and FY12 revenue improved by 12.6% and 8.4% respectively on the back of the growth in products sales, which were driven by the successful execution of its sales and marketing programs. The 4Q12 and FY12 PBT increased by 14.0% and 13.3% due to the better sales above and a lower operating cost such as in selling and administrative expenses.

Outlook   We expect a better earnings prospect for Amway going forward on the back of the increase in its number of distributors (we are anticipating FY13-14E YoY growth rate of 5.0%) and a continued rise in the revenue per distributor driven by the rise in private spending.

Change to Forecasts  We are maintaining our net profit estimate of RM106.4m for FY13E and introducing our net profit estimate of RM111.3m for FY14E. The rise would be mainly supported by its expected higher distributor productivity due to the company’s successful sales and marketing programs.  

Rating    Maintain MARKET PERFORM

Valuation   We are maintaining our TP of RM11.68 based on an unchanged 18.0x forward PER (which is at a +2SD level above the 5-year average PER) on the FY13 EPS of RM0.64. 

Risks   A slowdown in the global economy, which will cut the purchasing power of consumers. 

 Low liquidity of the stock may also limit its upside prospect. 

Source: Kenanga