SPRITZER (7103) : Spritzer: Extending 13 Years Of Uninterrupted Growth

SPRITZER (7103) : Spritzer: Extending 13 Years Of Uninterrupted Growth Water is one of our daily necessities. With water making up two-third of our body composition, the substance is crucial to the mechanics of the human body and is one of the most essential elements to health. One of the most common sources of water intake is bottled water. Many have stated convenience and availability as major motivators behind their purchase. For this reason, it is not hard to see why bottled water is one of the fastest selling liquid refreshment drinks globally. Quenching Malaysian consumers’ thirst for healthy beverages for over two decades is Spritzer. Market Leader The company is the largest bottled water producer in Malaysia. Its product range includes natural mineral water, distilled drinking water, fruit-flavoured drink and functional drink. The brand Spritzer is Malaysia’s best-selling natural mineral water. At the heart of its production is the 330-acre site of natural mineral water sources the company owns in Taiping, Perak. Besides bottled water distribution, Spritzer is also engaged in the manufacturing and distribution of toothbrushes, preforms and packaging bottles. Recession-Resistant Business In the latest fiscal year ended 31 May 2014, Spritzer achieved uninterrupted revenue growth for 13 years straight. The company also managed to sail through the Global Financial Crisis. Sales Figures

Source: FactSet

In addition, shareholders of Spritzer have been rewarded with dividend payouts every year for the past 14 years. The company has been allocating at least 23 percent of its earnings for dividend payouts.

Its highly consistent bottom line and dividend is what makes it a defensive play.

Above-Average Profitability
Comparing with its peers, Spritzer has emerged as one with above-average profitability. This can be attributed to its fully automated production lines. This means to say that the company can keep its cost structure in check.

EBITDA Margin

Source: FactSet

The company has continuously been upgrading itself to maintain its edge. In FY14, the company upgraded some production lines and acquired a new, fully automated and high speed production line that produce 30,000 bottles per hour. The increased capacity will help the company cope with growing demand. The company has an annual production capacity of about 500 million litres of bottled water.

In line with its expansion plans, Spritzer also acquired additional land in the vicinity of its Taiping mineral water plant and upgraded its warehousing and logistic facilities.

Also in the pipeline is the introduction of lighter-weight bottles to reduce material consumption so as to be environmentally friendly and at the same time keeping Spritzer’s cost competitive.

Decent Outlook
Spritzer growth momentum is expected to continue. The outlook for the bottled water market in Malaysia is underpinned by several factors. To name a few, growing population, rising disposable income, increasing health and wellness concerns and the portability of hygienic water in bottled packaging will fuel demand for Spritzer’s products.

With its wide range of offerings that come with various types and sizes, the company is well-positioned to capture a huge chunk of the local market. To boost its appeal further up a notch, the company provides online shopping and delivery services.

Given that bottled water is a relatively inexpensive consumer product, the upcoming GST hike would not put a big dent on demand.

Upside Potential
Following the release of Spritzer most recent quarter results, Mercury Securities rated it a “Buy” with target price of RM2.35. 1Q15 performance was in-line with the research house’s estimates.

Mercury Securities foresee steady domestic demand alongside the management’s effort to promote its various brands and range of bottled water products and enhance its production capacity and operational efficiency, as catalysts driving performance going forward.

http://www.sharesinv.com