AMWAY (MALAYSIA) HOLDINGS BERHAD Analysis Date:

(AMWAY)

All figures in thousands of Ringgit Malaysia except per share values and ratios

Financial Year: 2012 31/12/2012 Latest Quarter: 31/12/2012

Price: Stock Category: Emerging Investment Grade

Overview

Board: Main Board FBMKLCI: NO

Industry: TRADING SERVICES

Sub-Sector: TRADING AND DISTRIBUTION

Ownership: Corporate Owned (Local)

Institutional Holders Investment Strategy

% Shares Owned: 20.55% Portfolio Strategy: Lump Sum + Top Up

# of Holders: 9 Portfolio Execution:

Total Shares Held: 33,773,133

3 Mo. Net Change: 487,200 Averaging Down Method:

# New Positions: 0

# Closed Positions: 0 Basis for Buying & Selling:

# Increased Positions: 1

# Reduced Positions: 1

# Net Buyers: 0

Institutional Sponsorship

Market Direction

10/07/2013

2.70

Amway (Malaysia) Holdings Berhad, an investment holding company, distributes consumer products

principally under the Amway name worldwide. The company’s nutrition products include food supplements,

antioxidants, herbal supplements, fortified beverages, weight management, children’s supplements, bee

treasures, tropical herbs, and wellness packs under the NUTRILITE brand; and skin care, cosmetics, and

beauty accessories under the ARTISTRY name. Its personal care products include hair, body, oral, men’s skin,

allano and aloe care, and color creation products; homecare products comprise laundry care, household,

kitchen care, and car care products; and home tech products consist of cookware and cutlery, water

treatment systems, air purifiers, home alarm systems and accessories, and air treatment and cookware

replacement parts. The company’s sourced products comprise home appliances, top garments, fashion

accessories, apparels, leather and small goods, home and décor, equipment, stationery, personal items,

infant/children products, automotive products, houseware and aerosols, food and beverages, and

fragrances. Amway (Malaysia) Holdings Berhad also markets its products under the eSpring, ATMOSPHERE,

iCook, SATINIQUE, L.O.C, and SA8 brands. The company was founded in 1976 and is headquartered in

Petaling Jaya, Malaysia. Amway (Malaysia) Holdings Berhad is a subsidiary of GDA B.V.

Buy and Monitor

Dollar Cost/Value Averaging

Performance

Weekly Chart (Full History)

Price CAGR % 8%

Stock Versus Sector Peers

6.42%2.55% 0.00%

12.23%

39.51%

14.57% 16.53%12.57% 14.09%

69.70%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Sales - 5Y Growth EPS - 5Y Growth Debt to Equity - 5Y Avg Net Profit Margin - 5YAvg

ROE - 5Y Avg

Stock vs Sector Peers

Company Sector

14.60%

12.22%

6.74%

2.32%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

3-Y 5-Y 10-Y Full History

1.26

8.45

9.85

14.86

15.34

25.92

26.74

43.74

0 5 10 15 20 25 30 35 40 45 50

CNI

JAYCORP

HARISON

BERNAS

HAIO

ZHULIAN

DKSH

AMWAY

ROE by Sector Peers

67.94

75.60

212.28

545.91

802.48

1,449.00

1,684.04

1,982.50

0 500 1000 1500 2000 2500

JAYCORP

CNI

HARISON

HAIO

DKSH

ZHULIAN

BERNAS

AMWAY

Market Cap by Sector Peers

6.60

7.49

10.23

10.32

12.35

16.07

19.87

52.50

0 10 20 30 40 50 60

JAYCORP

HARISON

BERNAS

DKSH

ZHULIAN

HAIO

AMWAY

CNI

PE by Sector Peers

Key Ratios

Measures 2003/8/31 2004/8/31 2005/8/31 2006/12/31 2007/12/31 2008/12/31 2009/12/31 2010/12/31 2011/12/31 2012/12/31 5-Y WA. 3-Y WA. 10-Y GR. 5-Y GR. 3-Y GR. Sparkline Grade

Sustainable Competitive Adv. — — — — — — — — — — — — — — — —

Consistent and increasing ROE

(Pref. ≥ 15%)

24.58% 25.99% 26.08% 39.49% 38.91% 40.51% 30.52% 37.13% 46.78% 43.74% 41.93% 43.45% 6.26% 5.80% 8.19%

Consistent and increasing ROIC

(Pref. ≥ 15%)

-246.92% 563.69% 615.82% 2028.18% 450.19% 1241.38% 98.11% 119.79% 141.03% 138.25% 189.90% 135.66% -1.68% -11.40% 0.67%

Increasing Net Profit Margin (Pref.

≥ 10%)

17.51% 15.85% 14.45% 15.45% 20.59% 20.02% 14.89% 15.17% 16.44% 17.19% 16.58% 16.58% 0.11% -2.07% 6.23%

Healthy Cash Flow — — — — — — — — — — — — — — — —

Consistent and increasing CROIC

(Pref. ≥ 15%)

— 278.32% 1054.22% 1972.78% 398.20% 797.31% 52.59% 174.43% 149.54% 119.40% 164.67% 139.13% -26.87% -27.52% -18.95%

Increasing Free Cash Flow / Sales

(Pref. ≥ 5%)

— 5.18% 16.21% 10.07% 13.30% 9.51% 5.91% 16.79% 13.08% 11.13% 11.90% 12.80% 4.38% 11.09% -20.55%

Consistently decreasing (or

negative) Cash Conversion Cycle

-46.34 -30.62 -22.02 -12.24 -9.84 -22.18 -24.09 -19.45 -20.16 -10.05 -16.31 -14.97 9.27% 7.23% 11.34%

Conservative Debt — — — — — — — — — — — — — — — —

Increasing Debt Coverage Ratio

(Pref. ≥ 150%)

— — — — — — — — — — — — — — —

Increasing Quick Ratio (Pref. ≥

100%)

251.82% 229.15% 219.00% 275.94% 269.58% 209.21% 172.55% 147.18% 128.06% 169.44% 157.46% 152.34% -6.84% -7.20% 7.04%

Growth Quality

Column1 2003/8/31 2004/8/31 2005/8/31 2006/12/31 2007/12/31 2008/12/31 2009/12/31 2010/12/31 2011/12/31 2012/12/31

Revenue % 422297 456350 507030 723660 584251 645458 663902 719409 735818 797523

Year over Year — 8.06% 11.11% 42.73% -19.26% 10.48% 2.86% 8.36% 2.28% 8.39%

3-Y Avg. — — 9.14% 23.05% 7.09% -5.72% 6.39% 5.42% 5.14% 5.15%

5-Y Avg. — — — — 11.10% 8.35% 4.25% 1.16% 5.70% 5.26%

10-Y Avg. — — — — — — — — — 6.46%

EBIT % 67621 66515 67610 104085 120312 127481 98874 109149 120986 137066

Year over Year — -1.64% 1.65% 53.95% 15.59% 5.96% -22.44% 10.39% 10.84% 13.29%

3-Y Avg. — — -0.01% 22.39% 28.82% 10.14% -9.81% -7.76% 10.09% 11.39%

5-Y Avg. — — — — 16.00% 18.77% 9.63% -1.01% -1.44% 3.47%

10-Y Avg. — — — — — — — — — 7.78%

Net Income % 52044 53594 51899 80565 87912 95095 72543 78272 89959 99708

Year over Year — 2.98% -3.16% 55.23% 9.12% 8.17% -23.72% 7.90% 14.93% 10.84%

3-Y Avg. — — -0.14% 20.38% 26.35% 8.29% -9.61% -9.73% 10.76% 12.10%

5-Y Avg. — — — — 14.56% 16.74% 8.36% -2.50% -1.49% 3.10%

10-Y Avg. — — — — — — — — — 6.85%

EPS % 0.317 0.326 0.316 0.49 0.535 0.578 0.441 0.4761 0.5472 0.6065

Year over Year — 2.84% -3.07% 55.06% 9.18% 8.04% -23.70% 7.96% 14.93% 10.84%

3-Y Avg. — — -0.16% 20.38% 26.33% 8.26% -9.66% -9.70% 10.79% 12.10%

5-Y Avg. — — — — 14.54% 16.72% 8.32% -2.51% -1.49% 3.12%

10-Y Avg. — — — — — — — — — 6.83%

Cash From Ops. % 70624 24033 57722 61651 76689 95912 45539 94170 93049 90905

Year over Year — -65.97% 140.18% 6.81% 24.39% 25.07% -52.52% 106.79% -1.19% -2.30%

3-Y Avg. — — -10.09% 47.10% 14.21% 22.10% -26.06% -0.92% 35.73% -1.76%

5-Y Avg. — — — — 11.07% 30.52% -0.32% 3.26% 3.68% 6.07%

10-Y Avg. — — — — — — — — — 8.19%

Free Cash Flow % N/A 23646 82176.7 72894.08 77684.13 61409 39216.52 120788.12 96215 88782.25

Year over Year — — 247.53% -11.30% 6.57% -20.95% -36.14% 208.00% -20.34% -7.73%

3-Y Avg. — — — 56.29% -2.81% -8.57% -34.18% 33.82% 44.87% -15.39%

5-Y Avg. — — — — — 18.53% -16.51% 3.27% 11.04% 16.35%

10-Y Avg. — — — — — — — — — 10.15%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Growth Quality

Revenue EBIT Net Income Cash From Ops. FCF

Economic Moats

Reference: http://www.cfapubs.org/doi/pdf/10.2469/cp.v30.n2.9

Not available or no moat found

- Looks like AMWAY got very high gross margin: 30%-40%

- AMWAY owns a very strong customer base with loyalty.- Awareness of people in healthcare increases throughout the years.- AMWAY got very huge network of distributors which is a strong army to penetrate different market segment.

- Consumers are usually very loyal to this brand. They do not simply switch to another brand just because of cheaper pricing.

Cost Advantage

Switching Costs

Network Effect

Intangible Assets

Efficient Scale

Not available or no moat found

Red Flags in Financial Statement

Column1 2003/8/31 2004/8/31 2005/8/31 2006/12/31 2007/12/31 2008/12/31 2009/12/31 2010/12/31 2011/12/31 2012/12/31

Revenue 422,297 456,350 507,030 723,660 584,251 645,458 663,902 719,409 735,818 797,523

YoY Changes — 34,053 50,680 216,630 -139,409 61,207 18,444 55,507 16,409 61,705

YoY % — 8.06% 11.11% 42.73% -19.26% 10.48% 2.86% 8.36% 2.28% 8.39%

A/R 8,291 10,989 9,347 10,933 19,146 15,375 9,767 25,774 22,322 31,755

YoY Changes — 2,698 -1,642 1,586 8,213 -3,771 -5,608 16,007 -3,452 9,433

YoY % — 32.54% -14.94% 16.97% 75.12% -19.70% -36.47% 163.89% -13.39% 42.26%

Cash Conversion Cycle -46.34 -30.62 -22.02 -12.24 -9.84 -22.18 -24.09 -19.45 -20.16 -10.05

YoY Changes — 16 9 10 2 -12 -2 5 -1 10

YoY % — 157.18% 33.44% 28.50% 5.45% -26.54% -5.59% 14.41% -1.93% 27.93%

Days In Inventory 39.64 46.31 47.73 31.43 42.03 41.61 46.85 45.21 46.47 45.63

YoY % — 16.83% 3.07% -34.16% 33.73% -1.00% 12.59% -3.49% 2.79% -1.81%

Cash From Ops. 70,624 24,033 57,722 61,651 76,689 95,912 45,539 94,170 93,049 90,905

YoY % — -65.97% 140.18% 6.81% 24.39% 25.07% -52.52% 106.79% -1.19% -2.30%

The financial statement looks normal. No red flag found.

Discounted Cash Flows Valuation 12

Discount Rate

Average risk

premium

Average Risk

free rate

Unadjusted

Discount %

Business Risk

Factor

Financial Risk

Factor

Discount %

Default Value 1.17 0.88 9.35%

Custom Value 1.00

Margin of Safety

Initial RRR Dividend Yield Est. EPS

Growth

Unadjusted

MOS

Business Risk

Factor

Financial Risk

Factor

MOS

Default Value 35% 7% 28%

Custom Value 3%

Growth Estimation

Est. FCF

Growth (Base

Line)

Terminal % Decay Rate

(Yr4E-Yr7E)

Extra Decay

(Yr8E-Yr10E)

Default Value 8% 3% 15% 20%

Custom Value 6%

Financial Figures

Shares Out. 2012 FCFE Excess Cash Intangibles

Assets

Intangibles% add

to DCFDefault Value 164.39 88.78 0%

Custom Value

DCF Summary

7.19% 3.44%

148.86

10.63%

27%3% 1.17 0.88

4.78

Good Base Bad Ugly Good Base Bad Ugly Good Base Bad Ugly

NOSH.

Fair Value 11.46 10.41 9.43 8.52 12.02 10.52 9.20 8.03 12.85 10.55 8.70 7.19

Desired M.O.S.

Buy Under 8.29 7.53 6.82 6.16 8.69 7.60 6.65 5.80 9.29 7.63 6.29 5.20

Current Price

Actual M.O.S. 76% 74% 71% 68% 78% 74% 71% 66% 79% 74% 69% 62%

2.7

3-Y 5-Y 10-Y

164.39

28%

Absolute P/E Valuation Model

Good PE Base PE2 Bad PE3

Expected Earnings Growth 6.00% 12 3.00% 10 0.00% 8

Dividend Yield 5.17% 5 5.17% 5 5.17% 5

Business Risk Factor

Financial Risk Factor

Earnings Visibility Factor

Fair P/E

Current EPS

Fair Price

Margin of Safety

Buy P/E

Buy Price

Expected DPS

Expected Dividend Yield

Sell P/E

Sell Price 9.6011.2312.94

5.60%

14.97 13.26 11.55

21.34 18.52 15.83

0.65

7.26%6.33%

7.018.049.08

27.71%

1.00

0.88

19 17 15

11.60 10.27 8.95

1.00

0.61

EY% OSCILLATOR CALCULATOR

High Low

Green Zone Price($)

6.73% Buy Under RM9.15 10%

1.02%

5.91% Sell Above RM10.42 10%

Red Zone Price($)

Low High

Green Zone EY% 6.83% RM9.01

EY% Price ($)

Red Zone EY% 5.81% RM10.60

Trading Range

0.1312

0.1540

0.16200.1594

0.1404

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

Mar-12 Jun-12 Sep-12 Dec-12 Mar-13

EPS QoQ Growth EPS QoQ Growth: 7.01%

Notes

Created Date Note Type Source Type

10/07/2013 Every valuation model indicates that AMWAY is fully valued as of now. Note -

30/05/2013 http://eresearch.bursamalaysia.com/download.aspx?id=14365&type=research

- buying spurt ahead of several upward price revision

- buying spurt ahead of several upward price revisionWe remain positive on the group’s consistent

growth. Its 3-year sales CAGR is expected to range between 5.5% and 6.4% for FY13 and FY15,

underpinned by the group’s aggressive marketing initiatives and new product launches especially within

the nutrition and healthcare segments. That said, we maintain our core distributor force growth ranging

from 5.3%-5.6% between FY13-FY15.

Outlook Analyst Report

16/11/2012 http://eresearch.bursamalaysia.com/download.aspx?id=13513&type=research

We remain positive on the group’s consistent growth underpinned by its aggressive marketing initiatives

and short term strategies. Some of its strategies include: i)targeting the mass Malay market by providing

more incentives such as Umrah trips as a form of incentive for those achieving their sales targets, ii)

growing its younger distributor force (those younger than 35 years of age), and iii) focusing on the beauty

and wellness range of products. We believe its continued efforts especially in targeting the untapped

Malay market which make up about 60% of the Malaysian population will be its growth driver, going

forward.

Growth Driver;Outlook Analyst Report