KLCI Stock - AMWAY / 6351 - 2010 Quarter 4

Company Info

Market Capital (Capital Size)	1,397,277,982 (Large)
Par Value	RM 1.00

My Analysis

Forecast P/E now	(8.5-0.66)/0.5142 = 15.25 (Moderate)
Target Price	8.23+0.66 = 8.89 (PE 16.0, EPS 0.5142, DPS 0.66)
Decision	BUY
Comment	Revenue decreased 3.9% but higher than preceding year corresponding quarter 7.1%, eps decreased 14.8% but higher than preceding year corresponding quarter 11.8%, positive free cash flow decreased but net cash flow turn into negative, liquidity ratio decreasing from moderate to low level, moderate gearing ratio, all accounting periods are good, working capital getting lesser, continue to benefit from weak USD
First Support Price	8.1
Second Support Price	7.6
Risk Rating	MODERATE

Research House

OSK Target Price	11.05 (2011-02-17)
RHB Target Price	10.23 (2011-02-17)

Accounting Ratio

Return on Equity	37.13%
Dividend Yield	7.76%
Profit Margin	15.22%
Tax Rate	34.65%
Asset Turnover	2.2392
Net Asset Value Per Share	1.28
Net Tangible Asset per share	1.25
Price/Net Tangible Asset Per Share	6.64
Cash Per Share	0.83
Liquidity Current Ratio	1.991
Liquidity Quick Ratio	1.4718
Liquidity Cash Ratio	1.2385
Gearing Debt to Equity Ratio	0.5239
Gearing Debt to Asset Ratio	0.3438
Working capital per thousand Ringgit sale	15.2%
Days to sell the inventory	36
Days to collect the receivables	13
Days to pay the payables	68

My notes based on 2010 quarter 4 report (number in '000):-
- The Group’s sales revenue recorded an increase of 7.1% for the quarter under review and 8.4% for the year ended 31 December 2010 as compared to the corresponding periods in the preceding year. The growth in sales revenue was mainly attributable to increase in distributors’ productivity driven by sales and marketing program implemented in the periods under review, the effort index adjustment and the distributor price increase implemented in first half of the year

- The Group’s profit before tax increased by 25.4% for the quarter under review and 10.4% for the year ended 31 December 2010 as compared to the corresponding periods in the preceding year mainly due to the increase in sales revenue

- The Group’s sales revenue decreased by 3.9% as compared to the preceding quarter mainly due to enhanced sales and marketing program implemented in the preceding quarter

- The Group’s profit before tax decreased by 2.7% as compared to the preceding quarter in line with lower sales

- Estimate next 4Q eps after 2010 Q4 result announced = 0.4761*1.08 = 0.5142, estimate PE on current price 8.5 = 15.25(DPS 0.66)
- Estimate next 4Q eps after 2010 Q3 result announced = 0.3335+(0.1246*1.2) = 0.5497, estimate highest/lowest PE = 15.21/13.46 (DPS 0.64)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.3335+(0.1246*1.2) = 0.5497, estimate highest/lowest PE = 14.04/13.43 (DPS 0.52)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.3261+(0.099*1.1) = 0.4676(Correction to preceding Q estimated), estimate highest/lowest PE = 16.3/14.71 (DPS 0.5)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.0996*4 = 0.3984, estimate highest/lowest PE = 17.62/16.99 (DPS 0.48)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.1246*4 = 0.4984, estimate highest/lowest PE = 13.98/13.46 (DPS 0.48)
- Estimate next 4Q eps after 2009 Q2 result announced = 0.099*4 = 0.396, estimate highest/lowest PE = 17.6/16.92 (DPS 0.5)
- Estimate next 4Q eps after 2009 Q1 result announced = 0.118*4 = 0.472, estimate highest/lowest PE = 14.79/13.73 (DPS 0.52)
- Estimate next 4Q eps after 2008 Q4 result announced = 0.1332*4 = 0.5328, estimate highest/lowest PE = 13.06/11.75 (DPS 0.54)

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