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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.

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