Period     1Q13

Actual vs.  Expectations   The 1Q13 net profit (NP) of RM23m was broadly in line with the street’s estimate and our forecast of RM107.0m (21.5%) and RM106.9m (21.5%), respectively.  This was because 1Q is typically seasonally weaker due to lesser marketing and promotion activities to spur sales.

Dividends    A single tier dividend of 10 sen per share has been declared, which made up 16% of our total estimate of 62.5 sen for the year.

Key Result Highlights   QoQ, the revenue declined marginally by 0.8%. This was due to a lower distributor productivity resulting from the lower sales and marketing programs undertaken in 1Q13 as compared to 4Q12.

In line with the lower revenue, the PBT also dropped by 18.6% QoQ as well as affected by higher promotional expenses. Nevertheless, the decline in the NP was lower QoQ at 12.2% (as compared to the PBT performance) due mainly to a lower tax bracket of 25.9% vs. 31.5% in 4Q12.

On a YoY basis, the revenue grew YoY by a double-digit rate of 13.7% boosted by the increased purchases ahead of the planned price increases effective 1^st February and 1^st April this year. 

The NP meanwhile increased by 7.3% YoY on the back of the higher revenue (which was due to the reasons mentioned earlier above). Nevertheless, there was a 1ppt GP margin drop YoY to 30.8% in 1Q13.

Outlook    The 1Q13 has registered a double-digit growth due mainly to the pre-price increased in purchases. However, we prefer to remain conservative with a forecast of a single-digit  growth rate of 7% for FY13, which is in line with management’s view that they will be a softening of demand in the local market going forward.

Change to Forecasts     We are maintaining our net profit estimate of RM106.4m for FY13E and introducing our net profit estimate of RM111.3m for FY14E. The rise would be mainly supported by its expected higher distributor productivity due to the company’s successful sales and marketing programs.  

Rating  Maintain MARKET PERFORM

Valuation    We have rolled forward our valuation to FY14E EPS of 67.7 sen with a higher TP of RM12.20 (RM11.68 previously) based on an unchanged 18.0x forward PER (which is at a +2SD level above the 5-year average PER).

Risks    A slowdown in the global economy, which will cut the purchasing power of consumers. 

Low liquidity of the stock may also limit its upside prospect.

Source: Kenanga