Amway Q1 2019

• Gross profit margin and net profit margin of Amway shrink further to 23.81% and 4.29% from 24.71% and 5.61% respectively in 2018. 
• Distribution, selling and administration expenses accounts for 18.6% in Q1 2019 as compared to 18.17% in 2018. 

• From the above chart, we can see that USD/MYR dropped from January, February and March 2019 but still the margin of Amway shrink as compared to previous quarter? (not too sure about Amway hedging policy on USD). The average USD/MYR rate for Jan - Mar 2019 is 4.07

• The management is optimistic that the sales will continue to grow as the management mentioned that they will increase their selling price effective March 2019. However, the profit margin might be under pressure due to unfavorable USD rate. 

Comments

For the moment, there is no sign of recovery for Amway yet as their gross profit margin is below its benchmark of 24.5%. USD is on the rise as well. Hopefully the increase in product price will mitigate their cost of import however will it be harder for its ABO to sales their product as it becomes more expensive? 

At current price RM 5.83, its PE is 16.77 which is the lowest since 2014 and its DY is 4.72%. Amway achieve an EPS of 6.5 sen for the quarter, assuming if Amway generates an EPS of 28 sen for 2019, at PE 18 - Amway is worth RM 5.04, at PE 20 - Amway is worth RM 5.60.