Period  1Q14

Actual vs. Expectations 1Q14 results came in within expections, with the net profit (NP) of RM25.5m accounting for 23% of both our forecast and consensus full-year estimates.

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

Key Result Highlights

 QoQ, revenue rose by 8.0% due to the higher distributor productivity achieved in the current quarter, driven by sales and marketing programmes. In contrast, net profit fell by 12.1% owing to the higher operating expenses and higher effective tax bracket (1Q14: 25.8% vs. 4Q13: 20.4%).

 On YoY basis, 1Q14 revenue increased by 4.6%, with the growth led by successful sales and marketing programmes. PBT margin improved slightly by 0.8ppt to 16.1% as the group incurred lower operating expenses by shop conversion and digital enhancement strategy. Overall, the stronger sales coupled with the margin improvement resulted in 1Q14 net profit growth of 10.2%.

Outlook  We maintained our neutral view on AMWAY. The management’s continuous efforts in sales and marketing programmes coupled with the new product introductions would be more than enough to compensate for the strengthening USD outlook this year.

 FY14-15E net dividend yields of 5.3%-5.5% remained attractive for yield seekers.

Change to Forecasts  No changes to our FY14-15 forecasts for now.

Rating Maintain MARKET PERFORM

Valuation  We maintain our TP at RM12.65 based on an unchanged 18.7x PER over FY14E EPS of 67.7 sen.

Risks to Our Call    The implementation of GST could potentially hamper consumer spending.

 Strengthening in USD may cause higher cost of inventory.

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

Source: Kenanga