Amway’s 1QFY12
results were within consensus and our expectations. Revenue and net profit inched up
3.8% and 6.4% respectively on aggressive sales and marketing efforts and
lower overhead expenses. Gross margin, however, contracted as costlier raw material arising from stronger
USD against MYR took bite. However, the group’s EBIT and net margin improved due
to lower operating expenses. A first interim single-tier dividend of 10 sen per
share has been proposed. Maintain BUY with FV of
RM11.20 based on the DDM approach.
In line. Amway’s
1QFY12 results were in line with consensus and our estimates. Revenue
and earnings went up by 3.8% and 6.4%
y-o-y to RM179.3m and RM21.6m respectively.
The group’s sales and marketing programmes to stimulate demand for its products
contributed to the better topline growth, which in turn bumped up its earnings.
Vis-a-vis 4QFY11, group sales and profit were lower by -1.7 and
-13.3% due to higher promotion expenditure.
Lower operating
expenses. Gross margin was 40bps lower at 31.9% vs 32.3% y-o-y as the USD’s appreciation against the MYR lifted raw material costs. We believe that gross
margin is likely to be weaker in the future, judging from the recent strength
in the USD. However, EBIT margin expanded to 16.2% from 15.9% y-o-y, mainly
driven by lower overhead expenses (RM29.3m vs RM29.5m y-o-y). Likewise, net margin was higher at 12% vs
11.7% y-o-y, while the effective tax rate remained at 25.9%. A
first interim single-tier dividend of 10 sen per share was proposed for
the quarter, which is higher than the 9
sen per share declared last year.
Maintain BUY. We
maintain our FY12 and FY13 earnings forecast given that the results were in
line with our estimates. Maintain BUY,
with our
FV unchanged at RM11.20, based on DDM methodology. The stock’s dividend
yield remains at an attractive >6%.
Source: OSK
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