• Overview. Amway’s 1QFY21 revenue rose to RM391.2m (+10.6% yoy) mainly due to pre-price increase buy up for health & wellness products, overall promotion and growth in the buyers’ base due to increase Amway Privileged Customer (APC) count. However, net profit was flat yoy at RM20.2m owing to higher operating cost.

• Key highlights. Based on qoq basis, net profit increased more than 22 times mainly due to last quarter higher pay-out for ABO’s bonus and selling expenses as well as higher effective tax rate of 52% in 4QFY21.

• Against estimates: Above. 1QFY22’s net profit of RM20.2m was above our and consensus full-year forecast at 42% and 37% respectively. The main deviation against our forecast was due to lower than expected operating costs.

• Dividend. Amway has declared first single-tier interim DPS of 5 sen for FYE22 (1QFY21: 5 sen). We estimate a total DPS of 27.5 sen for FY22, translating into a dividend yield of 5.4%.

• Outlook. Amway profitability is expected to improve marginally in FY22 as previous year high cost from sales incentive plan is expected to normalise. As for long term growth, management will continue to invest strategically in certain areas such as ABO centric programmes, new product launches & promotions, as well as ongoing upgrades to the digital platform and related delivery infrastructure.

• Our call. We make no adjustment to our forecast at this juncture, pending some clarifications from the management. Maintain HOLD recommendation with unchanged DCF-derived TP of RM5.70 based on WACC of 7.5% and terminal growth of 1%. The company’s balance sheet remained healthy with solid net cash of RM266.3m as at 1QFY22 (FY21: RM236.8m).

Source: BIMB Securities Research - 26 May 2022