FY17 net profit of RM59.3m (+63%) came above our expectation (109% of forecast). The positive deviation can be attributed to the stronger-than-expected performance in MLM division. Post results, we upgrade our FY18E earnings forecast to RM75.7m (+9.3%) and we introduced our FY19E earnings forecast of RM98.3m. Maintain MARKET PERFORM with a higher Target Price of RM4.00 (from TP of RM3.64, previously).
Above our expectation. FY17 net profit of RM59.3m (+63%) was above our expectation at 109% of full-year forecast. Consensus comparison is not available as the stock is not widely tracked. The positive deviation can be attributed to the stronger-than-expected performance in MLM division. Final single-tier dividend of 11.0 sen was declared, bringing the total DPS for FY17 to 16.0 sen (FY16:15.0 sen).
YoY, FY17 revenue surged 36% to RM404.0m, mainly driven by impressive growth in MLM division (+55%) thanks to the strengthening of distributor base to c.143k (FY16: c.83k distributors) and the success in re-branding key beverage product “Min kaffe”. Correspondingly, EBIT jumped to RM77.3m (+60%), with expanded margin of 19.1% (+2.9pts), again boosted by MLM division (+73%), the MLM division contributed 80% of the FY17 group EBIT (FY16:74%). Coupled with a lower effective tax rate of 24.2% (FY16: 25.5%), FY17 net profit grew stronger by 63% to RM59.3m.
QoQ, 4Q17 revenue climbed 10% to RM118.4m, from improvement in MLM division (+20%), mainly due to the successful year-end overseas incentive trip sales campaign with higher sales volume generated from most of the products. The overwhelming response from Top Leaders Recognition Night and several mega events helped to keep its business momentum going. Correspondingly, EBIT was higher at RM23.2m (+8%), attributed by higher sales and A&P subsidy from suppliers in MLM division (+14%). Coupled with the lower effective tax rate of 22.7% (3Q17:27.8%), net profit was higher at RM18.2m (+16%).
MLM steady momentum. MLM continued with its momentum, which was driven by both expansion in distributor base and the strong productivity on the back of the effective product strategy and reward incentive system. The increased contribution of MLM division has also reduced the risks of other operating divisions, including wholesale and retail divisions, which are exposed to currency risk and weak consumer sentiment. Moving forward, the company is expanding its MLM business, venturing into fashion and beauty care under the brand “Infinence”, supported by the expertise of the company non- independent and non-executive director Prof. Datuk Dr Choo Yeang Keat (a.k.a. “Jimmy Choo”) and professional consultants (currently Rizman Ruzaini).
Post results, we upgrade our FY18E earnings forecasts to RM75.7m (+9.3%) and we introduce our FY19E earnings forecast of RM98.3m, on higher distributors base assumptions. Correspondingly, with the earnings upgrade, our TP is lifted to RM4.00 from RM3.64, based on a target PER of 15.2x, implying +1.5 SD over the 5-year mean, against FY18E EPS. Reiterate MARKET PERFORM.
Source: Kenanga Research - 30 Jun 2017
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Created by kiasutrader | Nov 27, 2024
Created by kiasutrader | Nov 27, 2024