KUCHING: The future outlook for Amway (M) Holdings Bhd’s (Amway) is viewed to be positive on the back of its aggressive marketing initiatives and short term strategies which includes targeting the mass Malay market, growing distributor force as well as focusing on its range of products.
According the the research arm of TA Securities Holdings Bhd (TA Securities) in its research report, Amway announced a net profit of RM73.5 million for the first nine months of the financial year 2012 (9MFY12) and an overall revenue growth of seven per cent year-to-date (YTD) to RM592.1 million (previously six per cent year-on-year at RM224.2 million).
On a quarter-on-quarter basis, Amway’s revenue was reported to have grown by 18.8 per cent to RM224.2 million.
The research house opined that the group’s commendable revenue growth was mainly driven by its aggressive marketing efforts, which targeted the mass Malay market in respect of the Raya festivities.
It further added, “The group has mentioned before that it intends to focus on the Malay market which currently contributes only 20 per cent of its sales.”
The Malay market constitutes about 60 per cent of the Malaysian population which the research house expected could be the group’s growth driver.
TA Securities further attributed Amway’s growth to its success of its sales and marketing initiatives following the introduction of 10 new products from its beauty, wellness and home care range since early this year, a higher selling price of an average 2.5 per cent in the first half of the financial year 2012 (1HFY12), and growing its younger distributor force (younger than 35 years of age).
It highlighted that Amway’s beauty and wellness segments made up 50 per cent of the group’s total revenues.
Meanwhile, despite having to incur higher cost from its intensive marketing initiatives since early this year, Amway’s earnings before interest, tax, depreciation and amortisation (EBITDA) grew by a further 12.1 per cent YTD to RM105 million (3.3 per cent year-on-year to RM37.7 million), TA Securities noted.
In addition, the group’s EBITDA margin had improved by a marginal 0.8 per cent points YTD.
“We believe the price fixing of its imported goods in ringgit (previously in US dollars) in addition to the increase in its selling price led to this improvement in margin,” the research house opined.
Optimistic on Amway’s growth, TA Securities increased the group’s target price to RM12.25 per share (previously RM12.11 per share) based on dividend discount model (DDM) after adjusting for a higher revenue.