Review

• 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%).

Source: TA Research - 22 Aug 2024