• Overview. Amway’s 4Q22 revenue of RM397mn increased by 6.8% QoQ and 1.2% YoY supported by strong sales for personal care products as well as new launches (i.e., XS Ignite and Artistry Vitamin C+HA3 serum). Impressively, net profit jumped higher to RM23mn (+23% QoQ, >100% YoY) with margin soaring to 5.8% (+0.7 ppts QoQ, +5.6 ppts YoY) credited to the normalization of Amway Business Owner (ABO) incentives and full impact of higher product prices.

• Against estimates: Above. FY22’s net profit of RM53.9mn (+109% YoY) was above our projection, accounting 117% of full year forecast despite revenue that was broadly inline. The positive variation was due to better-than-expected margin from the normalisation of sales incentives and better product mix.

• Higher Dividend. Declared a 4 rd interim and special DPS totalling 23 sen, bringing YTD DPS to 38 sen (FY21: 24 sen). This translates into a higher yield of 7%.

• Outlook. We are cautiously optimistic on Amway in FY23. Despite prevailing global headwinds, we expect Amway’s earnings and margin to improve on the back of the easing in supply chain disruption (c.80% of Amway products are imported form US), better product mix, normalization of sales incentives as well as effective cost containment measures.

• Earning revision. We maintain our forecast pending details from analyst briefing on 3rd March. Potential upside to our earnings forecast may come from better-than-expected operational efficiency.

• Our call. Reiterate a HOLD call recommendation with a DM-derived TP of RM5.20 (WACC: 8.3% and TG: 1%), which implies 15x FY23F PER. Amway balance sheet remain healthy with a net cash of RM237mn as at 4Q22.

• Upside risk to our call. i) higher-than-expected sales and ii) stronger MYR against USD resulting in lower operating expenses.

Source: BIMB Securities Research - 28 Feb 2023