Amway: Impact by the strengthening of USD-MYR

Results Update

For QE31/12/2014, Amway's net profit dropped by 7% q-o-q or 20% y-o-y to RM23 million while turnover increased by 5% q-o-q or 16% y-o-y to RM230 million.

Revenue increased q-o-q mainly due to higher sales generated by sales and marketing programs and higher productivity driven by Nutrilite 80th Anniversary programs. The Group’s profit before tax decreased by 0.6% q-o-q, mainly due to higher operating expenses.


Table: Amway's last 8 quarterly results

From the Chart 1 below, we can see that profit margins have declined in the past 2 quarters, probably due to the strengthening of the USD vis-a-vis the Ringgit. Unless Ringgit recovers, I expect Amway's profit margin to remain weak.


Chart 1: Amway's P&L, Profit Margins & Dividend Payout last 30 quarterly results

Valuation

Amway (traded at RM11.10 yesterday) is trading at a trailing PE of 18 times (based on last 4 quarters' EPS of 61 sen). Dividend yield remains strong at 5.0%. Despite the high PER, Amway will still stay firm at the present price due to its healthy DY.

Technical Outlook

Amway is in a long-term uptrend line. Immediate support is at RM10.40 while its immediate resistance is at RM11.50.


Chart 2: Amway's monthly chart as at Feb 10, 2015 (Source: ShareInvestor.com)

Conclusion

Based on high dividend yield & positive technical outlook, Amway is a good stock for long-term investment, especially for income purpose.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Amway.