Investment Highlights

• We reiterate our BUY call on Spritzer with a higher fair value of RM2.70/share (from RM2.40/share), based on FY23F PE of 15x at parity to its 5-year mean. This reflects an unchanged neutral ESG rating of 3 stars.

• Spritzer’s 9MFY22 core net profit (CNP) of RM26mil beat expectations at 89% of our previous FY22F net profit and 93% of the consensus. In comparison, 9M accounted for 71% - 86% of full-year CNP pre-pandemic periods (FY17 – FY19).

• As such, we raised our earnings by 12% for FY22F, 12% for FY23F and 7% for FY24F.

• The group did not declare any interim dividend for the quarter under review, as expected.

• YoY, the group’s 9MFY22 revenue rose by 41% on the back of higher sales volume of bottled water (+42%) coupled with higher average selling price. This was also helped partly by an increase of 26% YoY in the sales of plastic packaging materials. Accordingly, 9MFY22 CNP was also increased by 59% YoY.

• Segmental-wise, 9MFY22 manufacturing unit surged 41% YoY and trading unit went up 37% YoY due to higher selling volumes following the reopening of economic activities nationwide post-Covid-19.

• 3QFY22 CNP of RM11mil escalated by 91% YoY due to low base effect from last year wherein Covid-19 lockdowns had curtailed sales. Product breakdowns showed that 3QFY22 sales of bottled water were up by 54% YoY whereas sales of plastic packaging materials climbed 10% YoY.

• QoQ, 3QFY22 bottomline improved by 50% on revenue growth of 13% and improved economies of scale.

• We are positive on Spritzer’s near-to-medium term outlook, sustained by its growing bottled water business alongside the plastic packaging segment.

• We gathered that Spritzer has a current bottled water market share of 40%-45%, which is believed to have grown by 2%-3% from last year.

• The group currently trades at a compelling FY23F PE of 11.3x vs. its 5-year mean of more than 15x and offers a decent dividend yield of 3%, underpinned by substantially improving sales prospects.

Source: AmInvest Research - 29 Nov 2022