Life Water shares worth 16.9% more than IPO price

Sunday 22 Dec 2024

KUALA LUMPUR (Oct 30): Main Market-bound Life Water Bhd could see a 16.9% rise above its initial public offering (IPO) price of 65 sen apiece, according to Public Investment Bank (PublicInvest).

The research house projected a fair value of 76 sen apiece for Life Water, reflecting a price-earnings multiple of 10 times its forecasted earnings per share of 7.6 sen for 2025.

PublicInvest expects the Sabah-based beverage manufacturer to achieve a compound annual growth rate of 18.6% over the next two years, with its net profit expected to reach RM32.7 million in the financial year ending June 30, 2025 (FY2025) and RM39.6 million in FY2026.

This growth is to be driven by strong revenue projections, anticipated to increase from RM200.1 million in FY2025 to RM241.1 million in FY2026, bolstered by capacity expansion and market diversification.

Life Water primarily produces drinking water and carbonated drinks. It is also in plastic packaging production, and operates delivery and distribution centres. It markets its products under brands like 'K2', 'Sasa', 'Sabah Water' (drinking water), as well as '2more' and 'TRITONiC' (carbonated drinks). It also manufactures private-label drinking water for petrol stations, hypermarkets, wholesalers and hotels.

As at September, Life Water operated three beverage manufacturing plants in Sabah, with annual production capacity of around 389 million litres of drinking water and 37 million litres of carbonated and fruit drinks.

“Our projection is underpinned by the anticipated expansion of drinking water manufacturing capacity by 60%, increasing from the current annual capacity of 389 million litres to 627 million litres by 2026,” said PublicInvest in a note.

The research house also said Life Water's proven track record, a wide distribution network, and reputation as an established manufacturer of drinking water in Sabah with an experienced key management team give it competitive strengths.

Some analysts, however, have raised concerns on potential downside risks for Life Water, amid a saturated bottled water market and rising costs. While the company has seen strong revenue growth, factors like price fluctuations in raw materials and changes in consumer spending could hurt profits.

Aiming to raise RM81.87 million

Life Water's IPO, which entails a public issue of 97.56 million new shares, and an offer for sale of 28.39 million existing shares to selected investors by way of private placement, aims to raise RM81.87 million.

Of the proceeds, RM63.42 million to be raised from the public issue will go to the company, while the offer for sale that is expected to raise RM18.45 million will go to selling shareholders Liaw Hen Kong, Chin Lee Ling, Tan Hwong Kuen, and Lim Young Piau.

Upon listing on Bursa Malaysia, Life Water will have a market capitalisation of RM307.6 million, based on its IPO price of 65 sen and enlarged share base of 473.2 million shares.

The listing offers investors a 26.62% stake in the Sabah-based company.

Of the proceeds raised from the sale of new shares, RM19 million will be used to establish an additional drinking water manufacturing line at Sandakan Sibuga Plant 1, while RM12 million is allocated for a new line at Sandakan Sibuga Plant 2.

Another RM12.6 million is set aside for a second distribution centre in Sandakan, followed by RM9.61 million to expand plastic packaging facilities in Kota Kinabalu, and RM4.21 million for working capital. The remainder will cover listing expenses.

MIDF Amanah Investment Bank Bhd is the principal adviser, underwriter, and placement agent for the IPO.

Edited ByTan Choe Choe

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