Stock Name: AMWAY
Company Name: AMWAY (M) HOLDINGS BHD
Amway (M) Holdings Bhd
(Aug 11, RM9.00)
Downgrade to neutral at RM9 with revised fair value of RM9.86 (from RM11.05): While Amway 1HFY11 revenue dropped slightly by 0.5% year-on-year (y-o-y) to RM341.9 million, net profit increased 2.2% to RM39.2 million due to a weaker US dollar which bolstered margins. Results still came in below our full-year earnings forecast of RM88 million and consensus''' RM92.2 million. Weaker 1H sales were mainly due to the poorer 1QFY11 revenue (-1.6% y-o-y) which offset the stronger sales in 2Q (+0.5% y-o-y). Sales in 1QFY10 were boosted by increased buying prior to the selling price hike on'' March 1, 2010, which was absent in 2QFY11. On a quarter-on-quarter basis, top line declined 2.1% while net profit dropped 6.2% as sales in 1QFY11 were boosted by the Chinese New Year festival.
Despite the weaker 1HFY11 y-o-y sales, 1H earnings before interest and tax (Ebit) margin expanded 0.3 percentage points y-o-y to 15.5%, mainly supported by the stronger margin in 1QFY11 of 15.8% (3.1 pps y-o-y) which has buffered the impact of lower margins in 2QFY11 of 15.2% against 17.8% in the previous corresponding period. While 1QFY11 Ebit margin was boosted by the stronger ringgit against the US dollar, the group has spent more on advertising and promotion and incurred higher operating cost due to the investment in consumer access driven strategies in 2QFY11 compared with 2QFY10, which masked the benefit reaped from a stronger ringgit against the greenback.
Given that results were below expectation, we cut our FY11 and FY12 earnings forecast by 6% to 11% to RM82.7 million and RM84.6 million. Our fair value is reduced accordingly to RM9.86 based on a dividend discount model. The group has declared a second interim single-tier dividend of nine sen per share, making up a total year-to-date dividend of 18 sen per share. Given the poorer economic conditions and the fact that its products are priced at a premium, we expect Amway's earnings to be under pressure although the stronger ringgit could help to buffer the impact. ' OSK Research, Aug 11
This article appeared in The Edge Financial Daily, August 12, 2011.
Company Name: AMWAY (M) HOLDINGS BHD
| Research House: OSK | Price Call: HOLD | Target Price: 9.86 |
Amway (M) Holdings Bhd
(Aug 11, RM9.00)
Downgrade to neutral at RM9 with revised fair value of RM9.86 (from RM11.05): While Amway 1HFY11 revenue dropped slightly by 0.5% year-on-year (y-o-y) to RM341.9 million, net profit increased 2.2% to RM39.2 million due to a weaker US dollar which bolstered margins. Results still came in below our full-year earnings forecast of RM88 million and consensus''' RM92.2 million. Weaker 1H sales were mainly due to the poorer 1QFY11 revenue (-1.6% y-o-y) which offset the stronger sales in 2Q (+0.5% y-o-y). Sales in 1QFY10 were boosted by increased buying prior to the selling price hike on'' March 1, 2010, which was absent in 2QFY11. On a quarter-on-quarter basis, top line declined 2.1% while net profit dropped 6.2% as sales in 1QFY11 were boosted by the Chinese New Year festival.
Despite the weaker 1HFY11 y-o-y sales, 1H earnings before interest and tax (Ebit) margin expanded 0.3 percentage points y-o-y to 15.5%, mainly supported by the stronger margin in 1QFY11 of 15.8% (3.1 pps y-o-y) which has buffered the impact of lower margins in 2QFY11 of 15.2% against 17.8% in the previous corresponding period. While 1QFY11 Ebit margin was boosted by the stronger ringgit against the US dollar, the group has spent more on advertising and promotion and incurred higher operating cost due to the investment in consumer access driven strategies in 2QFY11 compared with 2QFY10, which masked the benefit reaped from a stronger ringgit against the greenback.
Given that results were below expectation, we cut our FY11 and FY12 earnings forecast by 6% to 11% to RM82.7 million and RM84.6 million. Our fair value is reduced accordingly to RM9.86 based on a dividend discount model. The group has declared a second interim single-tier dividend of nine sen per share, making up a total year-to-date dividend of 18 sen per share. Given the poorer economic conditions and the fact that its products are priced at a premium, we expect Amway's earnings to be under pressure although the stronger ringgit could help to buffer the impact. ' OSK Research, Aug 11
This article appeared in The Edge Financial Daily, August 12, 2011.
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