Kenanga Research has made an “OUTPERFORM” recommendation for Amway (M) Holdings Bhd with a lower TP of RM6.05 (from RM6.20) pegged to FY22E PER of 17.6x (implying 1SD below its 5-year mean) from 19x previously.
It said that the lower PER is justified given its pre-pandemic PER trading levels of c.18x when the Ringgit started to turn unfavourable. “Given its solid dividend yields, we maintain our OUTPERFORM rating,” the research house said.
The research house said that 9MFY21 top line of RM1.1b surged 31% due to continued robust demand for nutrition & wellness products throughout the year adding that the demand was also underpinned by the AMWAY Privileged Customer (APC) and strong field momentum driven by the new Sales Incentive Plan introduced in Jan 2021.
It said that the higher costs of inputs saw GP margin eroded by 1.5ppt to 19% with EBIT margin down by 2.5ppt given the higher sales incentives and provisioning. With no significant change in ETR, PATAMI ended at RM36m (-16%).
Its risks to its call include, lower-than-expected sales, and higher-than-expected import costs.
