Overview. Spritzer’s revenue declined 38% yoy to RM79.3m vs RM88.6m in 3QFY20 on lower average sales prices due to consumers turning to lower-value products. In addition, sale of bottled water and related-products dropped 13% yoy during the stricter business environment where most of the states facing Phase 1 and Phase 2 NRP implementation. Nonetheless, China sales was higher as Spritzer ventured into selling a wider range of sundry goods, which led to better sales for trading segment +6.7% YTD.

Key highlights. PBT saw a decline of 57.6% to RM6.2m attributed to higher cost in raw and packaging materials. As a result, net profit was squeezed by 42.5% to RM6.0m with net margin declining to 7.5% (-4.2 ppts).

Against estimates: Below. Overall, 9MFY21’s net profit of RM33.4m came in below our estimates at 48%, whilst inline with 72% consensus full year estimates. Due to that, we adjusts lower our FY21F/FY22F/FY23F earnings forecast by 36%/27%/16% respectively to RM21.5m/RM28.3m/RM37.3m on account of the increase in selling and distribution expenses amidst low ASP.

Outlook. With over 88% of the states were in NRP Phase 4 coupled with a more conducive endemic business environment i.e. normalized HORECA operation and social activities (events) now allowed, we anticipate earnings to improve starting 4QFY21 quarter and onwards.

Our call. Maintain BUY call with TP of RM2.60 by applying a PE of 25x on its FY21 EPS of 10 sen.

Source: BIMB Securities Research - 29 Nov 2021