Amway’s 1QFY13 results were within  consensus  and  our  estimates,  as 1H is normally weak. YTD, sales and earnings rose by 13.7% and 6.9% y-o-y,  largely  driven  by  an  increase  in  buying  prior  to  its  price  hike.  The higher  cost  of  sales  dragged  down  margins  for  this  quarter.  The company has proposed a first interim single-tier dividend of 10 sen per share. Maintain NEUTRAL, with a MYR11.80 FV.

-  Within estimates. Amway (AMW)’s 1QFY13 revenue and net profit grew by  13.7%  and  6.9%  y-o-y  respectively  to  MYR203.9m  and  MYR23.1m. The growth in sales was mainly attributed to consumers buying products ahead of its price increases, which were effective from 1 Feb and 1 April this  year.  The  earnings  growth  was  supported  by  the  increase  in  sales revenue as well. Compared to 4Q12, turnover was lower by 0.7% due to higher productivity in the preceding quarter as distributors were motivated 
by  its  sales  and  marketing  programs. The company’s net  profit  fell  by 11.8%,  no  thanks  to  lower  sales  and  higher  marketing  expenses.  The Group expects its revenue to grow in the low single digits this year due to the softening demand.

- Softer margin. AMW’s YTD EBIT margin moderated by 90bps to 15.3% from 16.2% due to the higher cost of sales (+15.7% y-o-y) which crimped its topline growth. It declared an interim single-tier dividend of 10 sen per share this quarter, similar to 1Q12.    

- Maintain  NEUTRAL.  With  its  strong  market  presence  and  well-known brand names, we believe Amway is on track to deliver satisfactory results moving  forward.  Maintain  NEUTRAL,  with  our  DDM-based  FV unchanged at MYR11.80.

Source: RHB