Period 1Q12
Actual vs. Expectations
The 1Q12 net profit
(NP) of RM21.6m was broadly in line with the street’s estimate and our forecast
of RM93.8m (23%) and RM100m (22%) respectively.
Dividends Single
tier dividend of 10 sen per share has been declared. This payout is 11% higher
than normal as the company previously had been paying a consistent interim
dividend of 9 sen for all the quarters in the past two years.
As such, we are
adjusting our payout forecast higher to a total of 70 sen for the full year (66
sen previously), which translates into a high dividend yield of 7.2%. We
believe this 10 sen dividend is sustainable for the remaining quarters on the
back of its payout track records as well as its strong net cash position of
RM143m.
Key Result Highlights
Revenue YoY improved
slightly by 4% on the back of higher demand of its products driven by the success
of its sales and marketing programs.
NP YoY increased 6%
due to better sales and operating efficiency (the operating expenses-tosales
ratio dropped 0.8ppt to 16.3%).
On a QoQ basis, the
revenue declined marginally by 2%. This is because there was absent of sales and
marketing program in 1Q12. Such program in 4Q11 had resulted in higher
distributor productivity.
NP meanwhile dropped
by 13% QoQ due to lower sales and higher promotional expenses.
Outlook Better
earnings prospect is expected on the back of an increase in the number of
distributors (we are anticipating a 5.1% and 5.0% YoY growth rate for FY12 and
FY13) and a continued rise in its revenue per distributor driven by the rise in
private spending.
Change to Forecasts
We are maintaining
our earnings estimates of RM100.0m and RM106.4m for FY12-13E for Amway as we
foresee better earnings in 2H12 due to seasonal factors.
Rating MAINTAIN OUTPERFORM
Valuation We
believe Amway deserves our TP of RM10.94, based on 18.0X forward PER over its
FY12 EPS of RM0.608. This is due to its strong track records in growing its
sales consistently, as well as its attractive net dividend yield of 7.2%.
Risks A
slowdown in the global economy, which would cut the purchasing power of
consumers.
Low liquidity of the
stock may limit its capital appreciation prospect.
Source: Kenanga
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