Amway’s  FY13  results  were  within  consensus  and  our  expectations. Top- and bottomlines expanded given the stronger recorded sales. A 10 sen  interim  dividend  and  22.5  sen  special  dividend  were  proposed. Maintain NEUTRAL,  with a new FV of MYR11.80 (from MYR12.20) as we roll over our DDM valuation to FY14.

• Within  expectations.  In  FY13,  turnover  and  earnings  rose  4.6%  and 9.3% y-o-y respectively, Sales were  higher  owing to  the positive impact of sales and marketing programmes  and  the increase in prices that  took effect this year. Net profit rose to MYR109m from MYR99.7m in FY12,mainly  driven  by  a  better  topline  and  an  improved  gross  margin. Compared with  3Q13,  revenue and earnings were lower by 13.5% and 13.1%  q-o-q  given  the  higher  distributor  productivity  achieved  and  the exceptional demand for its air purifier in the preceding quarter.
• Better  margins.  The  company’s  gross  margin  widened  y  40ppts  to 13.9%  from  13.5%  in  FY12  due  to  higher  sales  generated.  EBIT  and PBT margins also widened by 20ppts and 60ppts y-o-y respectively due to stronger revenue.   
• Decent  dividend  yield  at  >5%.  The  group  declared  a  fourth  interim dividend of 10 sen and  a special interim dividend of 22.5  sen per share. FY13  DPS  stood  at  62.5  sen,  representing  a  dividend  payout  ratio  of 95%  and  a  dividend  yield  of  >5%.  The  key  investment  risks  are:  i)  a decline in consumer spending power, ii) intensifying competition, iii) an unfavourable forex rate (ie  USD/MYR)  during  its annual pricing review, and iv) the company’s inability to pass on higher cost to its customers.
• Maintain  NEUTRAL.  We  leave  our  numbers  unchanged  since  the results are in line with expectations.  We  revise  our FV slightly lower  to MYR11.80 from MYR12.00 as we roll over our  DDM valuation  to FY14 from FY13.  Maintain NEUTRAL,  as the stock is  trading at a forward P/E of  20x,  which  is  on  par  with  its  3-year  historical  P/E  of  18x.  Amway’s dividend yield is still attractive at >5%. 

Financial Exhibits

SWOT Analysis

Company Profile
AMWAY is a leading multi-level marketing company in Malaysia.

Recommendation Chart

Source: RHB