We believe that direct selling leader Amway, which has stood tall all these years, will be able to deliver stable single digit earnings growth, supported by: i) a strong brand presence, ii) a wide range of quality products, and iii) aggressive distribution and marketing activities. The company is likely to maintain its dividend payout of >100% given its strong balance sheet and huge cash pile. With its well-recognised brand name, stable performance and lucrative dividend yield, we see no reason not to maintain our BUY call, and with a slightly higher RM11.45 FV too.
The MLM leader. Leading multi-level marketing (MLM) multinational Amway (Malaysia) Holdings is celebrating its 36thyear in Malaysia this year. With a 10.5% market share and a 232,000-strong core distributor force (CDF) in 2011, it is the top player in the local direct selling industry. The group has been recording stable top- and bottom-line growth for the past two years and offering a rewarding dividend yield of >6%. The Amway brand has been named 'Best Brands in Consumer-MLM' for five consecutive years at the BrandLaureate Awards.
Amway Shops coming closer to you. The group's plan to convert its regional distribution centres (RDC) into Amway shops, which started in 2008, should be completed in 2013. The shops, located in prime areas, enjoy high visibility and attract potential prospects to its CDF as well as give its distributors greater access to its products and services. Currently, the group's distribution network consists of 16 shops and 9 RDCs. It is expected to convert three or four more RDCs in FY12. Going forward, the group will launch seven to eight products spanning across its beauty, wellness and homecare categories.
Generous dividend on the way. The company has a policy of maintaining a dividend payout ratio of no less than 80% of the group's current-year earnings, subject to the amount of cash and distributable reserves. In view of its rich cash pile and strong balance sheet, we expect Amway to maintain a generous dividend payout of >100%. This translates into a net DPS of 63.5 sen and a high dividend yield of 6.3%.
Maintain BUY. We continue to like the company's strong brand presence, resilient stock performance and appealing dividend yield, especially amid the current global headwinds. After incorporating a stronger top-line, we are revising our FY12 and FY13 forecasts marginally higher by 2.3% and 2.9% respectively. Maintain BUY, with a new FV of RM11.45, based on DDM methodology.