AMWAY: Attractive Enough for Long Term Investing

Result Update

For QE31/3/2021, Amway's net profit rose 371% q-o-q or 97% y-o-y to RM20 million while revenue rose 12% q-o-q or 51% y-o-y to RM354 million. Revenue was higher than the preceding quarter by due to stronger demand for nutrition and wellness products, home appliances and new customer segment namely Amway Privileged Customer (APC) program launched in January 2021. The Group’s profit before tax increased by 433% as compared to the preceding quarter due to higher sales volume and lower selling and administrative expenses.

Table: Amway's last 8 quarterly results


Graph: Amway's last 54 quarterly results

Financial Position

As at 31/3/2021, Amway's financial position is deemed healthy with current ratio at 1.4 times while total liabilities to total equity appeared high at 1.2 times. However, it has cash balance of RM162 million or about RM0.99 per share.

Valuation

Amway (closed at RM5.19 yesterday) is trading at a trailing PER of 15 times (based on last 4 quarters' EPS of 34.6 sen). At this PER, Amway is deemed fairly attractive. In addition, investors may take comfort in receiving a decent dividend yield of 5.3%.

Technical Outlook

Amway has dropped from a high of RM12.50 in 2013 to a recent of RM4.50 in Mar 2020 (during the selldown at the start of the pandemic).


Chart 1: Amway's monthly chart as at May 25, 2021 (Source: Malaysiastock.biz)

From the daily chart below, Amway has been rising slowly in an uptrend line (in blue) with support at RM5.20.

Chart 2: Amway's daily chart as at May 25, 2021 (Source: Malaysiastock.biz)

Conclusion

Based on decent financial performance, good financial position, attractive valuation & a constructive technical outlook after a long decline, Amway could be a good stock to consider for recovery play. 

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.