4QFY10 Results
- FY10 core net profit of RM70.3m (+34.4% yoy) was in line with our but below consensus. Proposed final dividend of 10 sen (less tax) and single tier dividend of 4.5 sen, bringing FY10 gross dividend to 21.7 sen, below our expectations of 24.2 sen. This translates to net payout of 46.6%, below the company’s guidance of 50%.
- 4Q10 MLM division results came in below management’s internal target, due to the company’s more stringent rules on new membership recruitment coupled with hike in interest rates, which affected the growth of new membership recruitment. (Highlighted in our report dated 21 May 10).
- The more stringent MLM ruling, could affect membership recruitment drive for another 3-6 months, which could lower member’s productivity and even result to memberships being revoked. Following this, we have cut our MLM division’s net membership growth to 0/mth (from 1,500) for FY11 and 1,000/mth (from 1,500) for FY11. We have also reduced our revenue/distributor growth to -5% (from flat) in FY11 but maintained it at 1% for FY12.
- Following the above changes, adjusting for FY10 results and reducing our net dividend payout to 45% (from 50%) following the lower payout in FY10, our earnings forecasts are reduced by 13-23% for FY11-12.
- We roll forward our valuation target to CY11 (from FY11). As such, our fair value has now been reduced to RM4.06 (from RM4.30) based on unchanged 10x CY11 EPS. Our recommendation for the stock is currently under review pending a company briefing later today.
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