Wednesday 17 Apr 2024
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KUALA LUMPUR (Nov 28): Shares in Spritzer Bhd hit a fresh high on Tuesday following the release of its financial results for the third quarter ended Sept 30, 2023 (3QFY2023), which outperformed analysts' estimates. 

The counter, which opened at RM1.75 and touched a high of RM1.87, closed at RM1.82 — up 13 sen or 7.69 from its previous record high of RM1.69 n Monday. It was the ninth biggest gainer on Bursa Malaysia. Trading volume swelled to 3.7 million from 382,800 the day before. 

At its latest closing price, the group is valued at RM581.15 million. The counter has risen about 23% year-to-date and close to 31% in the past year. 

Spritzer's net profit jumped 48.5% to a record high of RM16.97 million for 3QFY2023, from RM11.43 million a year ago, as the company sold more bottles of drinking water amid recovery in tourism activities plus hot weather. Quarterly revenue rose 10.85% to RM132.56 million, from RM119.59 million a year ago.

This brought its net profit for the cumulative nine months ended Sept 30, 2023 (9MFY2023) to RM36.27 million, 41% higher than the RM25.7 million recorded in the same period a year earlier. Revenue grew 12.7% to RM365.67 million, from RM324.6 million the prior year. 

“Spritzer reported a core Patanci (profit after tax and non-controlling interest) of RM36.3 million for 9MFY2023, excluding a one-time-off item of RM200,000. This surpassed both our and the consensus full-year FY2023 projections, constituting 87.1% of ours and 95.7% of the consensus,” said MIDF Investment Bank Bhd. 

The research house raised its earnings forecasts for Spritzer upwards by 33.4% for FY2023 and 21.1% for FY2024, but maintained its FY2025 projection. This was after factoring in stronger sales volumes mainly driven by robust tourist activities as well as business events, and lower raw material cost due to reduced PET resin, as well as the economies of scale on the back of stronger product demand. 

Meanwhile, MIDF, which maintained its "buy" call on the stock, raised its target price (TP) to RM2.10 (from RM1.85), based on higher forecast earnings per share (EPS) of 19 sen for FY2024, from the previous estimate of 15.7 sen. This valuation is anchored to an updated price-earnings ratio (PER) of 11.1 times, closely aligning with the stock’s three-year historical PER. 

“Going forward, we are upbeat about Spritzer's FY2024 outlook, underpinned by i) its defensive business nature; ii) increased tourist movement and out-of-home activities, which may increase demand for bottled water; iii) rising business events and activities post-border reopening that raise demand for bottled water during the events; and iv) potential expansion into the Singapore market,” MIDF wrote in a note. 

Spritzer's performance for 9MFY2023 also surpassed PublicInvest Research's expectations, accounting for 103% of its full-year estimate. The research house raised its earnings estimates for Spritzer by 14%-35% for FY2023-FY2025, after lowering its cost assumptions. 

“We expect Spritzer to post higher earnings going forward, underpinned by stronger bottled water demand and an increase in production volume, as the group is operating near its optimal capacity (from 1 billion to 1.2 billion litres per annum),” said the research house.

“We are optimistic about Spritzer’s future outlook, as we believe that the resumption of economic and tourism activities will continue to drive bottled water sales. As such, we upgrade our call on Spritzer from ‘neutral’ to ‘outperform’, with a higher TP of RM2.08, based on 13 times PER on FY2024 EPS,” it added. 

Similarly, AmInvestment Bank Bhd lifted the group's net profit by 20%-43% for FY2023-FY2025 on higher bottled-water sales and lower raw material cost. It also maintained its 'buy' on the stock, with fair value raised by 25% to RM2.27, from RM1.81. 

"The group is focusing on expanding its market presence in Singapore, which we believe is underpenetrated although incurring high logistic costs currently. The new prodution in Yong Peng will commence by the end of 2023, which is expected to reduce logistic costs in Singapore," AmInvestment said in a separate note.

Edited BySurin Murugiah
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