Review

• AMWAY’s FY23 core earnings of RM123.8mn beat expectations, accounting for 106% and 115% of ours and consensus’ full-year estimates, respectively. The earnings outperformed due to lower-than-expected operating expenses.

• The group declared a fourth interim dividend of 5.0sen/share and a special single-tier interim dividend of 40.0sen/share (4QFY22: 23.0sen/share), bringing the YTD dividend to 60.0sen/share higher than corresponding period last year (FY22: 38.0sen/share).

• YoY, In FY23, its revenue reduced by 7.0% YoY, which can be attributed to weaker sales of health wellness products as well as home appliances. Core PBT increased 44.1% YoY to RM160.4mn due to increase in ASP and lower sales, resulting in lower sales incentives payout.

• QoQ, 4QFY23 revenue rose marginally by 7.4% QoQ driven by a home appliance promotional campaign and new products launches. However, core PBT dropped 28.9% QoQ to RM43.6mn due to higher opex incurred.

Impact

• Maintain our earnings projections at this juncture, pending an analyst briefing today.

Outlook

• Moving forward, we expect Amway’s revenue to normalise back to its pre-pandemic levels as consumers shift away from health supplements. As such, Amway will focus on the growth of ABOs, and innovative mix products launch in FY24.

• In FY23, Amway’s dividend yield stood at 9.2%. We expect the group to remain a dividend play, with the dividend yield expected to be maintained at 8.6%-9.5% in FY24-26.

Valuation

• We put our Hold recommendation under review with an unchanged TP of RM5.80/share based on DDM valuation approach (k: 8.4%, g: 1.0%).

Source: TA Research - 29 Feb 2024