By Lawrence Yong
Direct-selling company Amway (M) Holdings is targeting younger recruits as well as the Malay segment through digital means in its next growth phase. This would augur well for the 37-year old pioneer which sells a myriad of lifestyle and wellness products.
The Malaysian branch of the Amway worldwide group is among its top 10 performing affiliates and is a super resilient company, having recorded a 16-year revenue compounded average growth rate (CAGR) of 6.7% and net profit CAGR of 4%.
“The company managed to remain profitable and withstood major financial upheavals namely the Asian Financial crisis (1997), the IT bubble (2000) and more recently the subprime and Eurozone crisis. Moving forward, we believe Amway will stay in the black mainly driven by its aggressive new distributors recruitment and opening of more outlets,” BIMB Securities Research analyst Noorhayati Maamor said in their first coverage of the company.
Amway’s share price has been on a gradual uptrend over the last one year and for May was trading within the higher ranges of RM11.50 to RM12 on Bursa Malaysia.
Recapping the history of Amway Malaysia, BIMB noted that it started in 1976 with just five employees in a small office and warehouse facility in Jalan Ipoh. Today it has burgeoned to having more than RM200 million in equity and become a household name. The company was listed in 1996 and became the first ever direct-selling company to be listed on the Main Board of Bursa Malaysia. Amway is also the first direct-selling company to be awarded a 10-year Direct Selling License by the Ministry of Domestic Trade Cooperatives and Consumerism (MDTCC) in 2010.
As at FY12, the company operated 20 shops and six Regional distribution Centres (RDC) throughout Malaysia. From last year, the company’s distributors have also increased the use of its website, Facebook and mobile apps.
The company’s core distributor force (CDF) has been growing in the last 10 years and now numbers about 245,000 sellers.
“Today, the company is one of the leading multi-level direct-selling companies in Malaysia and is witnessing a positive penetration into the Malay market whilst maintaining a growth in the Chinese market,” Noorhayati noted.
She noted that in 2012, 56.4% of new distributors who joined Amway’s network were aged below 35, while the Malay segment had increased by 19.5%. Meanwhile, Amway shops also recorded a 14% increase in sales revenue.
The company’s key brands include Nutrilite and Artistry. It also launched eight new products last year. It had low capital expenditure needs of RM4 – RM5 million, mostly to refurbish shops and enhance its website amway2u.com.
Noorhayati was also positive about the direct-sales business in Malaysia. She said that MDTCC forecasts that the direct sales market value could reach an all time high of RM10 billion in 2015, more than double the RM4 billion in 2011. This growth was in line with Malaysia’s population expansion and growing affluence.
Looking ahead, BIMB estimated that Amway’s revenue may grow by 5.3% over the next two years. Amway also upped its dividend payout to 80% from 2012, from 50% previously, and is expected to pay a dividend of 65 sen for FY13 or a 5.4% yield. For FY12, Amway paid 62.5 sen/share.
“With a steady cash pile and solid cashflows, we believe the company is able to support its regular dividend payments moving forwards,” BIMB research said.
Amway posted a net profit of RM99.7 million for FY12, its highest in at least a decade. BIMB said they expect net profits to rise further to RM105.8 million and RM111.4 million for FY13 and FY14 respectively.
Amway Malaysia is 51%-owned by GDA BV, formerly known as Amway Global Development BV, based in Tiel, the Netherlands. Its other major shareholders are Skim Amanah Saham (11.9%) and government pension fund KWAP (8.4%).
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