Amway’s 1HFY24 core net profit increased by 27.8% YoY to RM55.3mn, accounting for 56% and 53% of ours and consensus’ full-year forecasts. We deem the results to be within expectations as we anticipate weaker results in the 2H of the year.
IHFY24 revenue declined 13.7% YoY to RM618.5mn. The weaker top line was mainly due to rush trade purchases prior the price adjustment in 1HFY23 and subdued consumer demand for health & wellness products and home appliances. Despite this, core earnings grew by 27.8% YoY due to adjustments in product price and lower ABO incentives payouts, which offset the poor demand.
For 2QFY24, core net profit slid 27.8% QoQ while revenue dropped 8.0% QoQ. The weaker performance was attributable to the reduced sales of health & wellness and home appliances products, as well as higher product costs incurred during this quarter.
The board declared a second single-tier interim dividend of 5.0sen/share, bringing its YTD dividend to 10.0sen/share (1HFY23: 10.0sen/share).
Impact
No change to our earnings forecasts.
Outlook
For 2HFY24, the direct selling industry continues to face difficulties due to the rise in full-time job opportunities offering greater job security. Despite ongoing ABO-centric initiatives to motivate its members, we forecast the FY24 margin to be 8.0% (-0.2pp YoY).
Going forward, we expect demand to remain soft due to uncertainties in the global economy and ongoing inflationary pressures, which are leading to cautious spending patterns
The group is expected to maintain its net cash position for FY24-26F. We anticipate the dividend yield will remain attractive, ranging from 6.4% to 7.1% in FY24-26F, backed by its stronger net cash position.
Valuation
Maintained SELL on Amway with an unchanged TP of RM7.30/share, based on DDM valuation approach (k: 9.7%, g: 2.0%).
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