Amway expects earnings growth to remain stable

PETALING JAYA: Amway (M) Holdings Bhd is expected to sustain stable growth in its earnings, underpinned by lower operating costs and improved product mix in the quarters ahead, says Kenanga Research.

The research house noted the group’s earnings for the nine-month period ended Sep 30, 2022 (9MFY22) exceeded both its and consensus expectations.

Although revenue saw marginal year-onyear (y-o-y) growth of 2.2% for the period, net profits surged by 50.7% due to better costs strategy and higher sales volume.

“Sales of consumer products grew 2.1% y-o-y while sign-up fees grew 9.4%.

“However, earnings before interest, taxes, depreciation and amortisation rose 26.4% y-o-y,” said Kenanga Rsearch in its latest report.

The results were driven by the standardisation of the Amway Business Owner incentives and price increases across product offerings.

“We also believe this is due to better product mix from increased demand for supplements and personal care products.

“Overall, profit after tax and minority interests grew by 50.7% as earnings benefitted from the improved margins,” said the research house.

Moreover, new product bundle launches supported the group’s revenue growth in the third quarter this year, by 4.8%. Consumer sales also went up by nearly 5% quarter-on-quarter.

However, Amway reported flattish performance for sign-up fees.

“Overall, earnings grew 22.3% mainly due to better sales volume and the adjustment of sales incentives for their agents,” said Kenanga Research.

Despite its upgrade to an “outperform” call on the stock with a higher target price of RM5.65, the research house cautioned against elevated ringgit to US dollar exchange rate that may hamper Amway’s earnings.