Amway Q2 2019

1. Revenue increased by 3.3% while gross profit increased by 18.6% as product buy up activities ahead of price increases effective mid-March and mid-April 2019. 
2. Distribution and selling and admin expenses remain flat which is good. 
3. Profit before tax increased by 83% due to higher sales and lower import cost primarily attributed to favorable foreign exchange impact.

1. Operating cash flow generated from operating were RM 51 million for 6 month cumulative which accounts for full year operating cash flow for the past 3 years. 
2. The company has a net cash of RM 198 million which equivalent to RM 1.21 net cash per share. 

• Movement of USD/MYR for April, May & June 2019. Its average is around 4.15.

1. The management is optimistic of Amway growth in 2019. 

Comments

1. The net profit margin improved to 6.1% which is the highest level since 2016 as Amway increase their product price effective April 2019. This is something worth taking note as dividend payout ratio of Amway is 80% - 90%. Therefore, increase in EPS would lead to increase in dividend payout. 
2. Assuming if the EPS for the year is 35 sen, 85% dividend payout would be 30 sen. At RM6 a share, its DY is 5%. 
3. At RM6 a share, its PE is 14.4 which is the lowest in 5 years. As mention in my previous post, a reasonable PE for Amway is 18 - 20. Assuming Amway is able to achieve an EPS of 35 sen, At PE 18 Amway is worth RM6.30. At PE 20, Amway is worth RM7.