Spritzr ... Sep10

KENANGA RESEARCH

FY10 results above expectations

- Spritzer’s FY10 net profit RM 12.5m achieved 19% above our FY10 forecast of RM10.5m. This came on the back of 21.6% increased in FY10’s revenue to RM131.6m as improved consumers’ confidence continues to push robust demand for Spritzer’s bottled water products.

- QoQ, 4Q10 RM38.1 revenue up c.18% from the preceding quarter’s RM32.5m with corresponding c.8% increase in pre-tax profit at RM3.8m. Although, 2H sales is traditionally stronger due to timing of festive seasons but Spritzer’s new bottling plant in Shah Alam provided the extra boost. This new plant facilitates the supply of bottled water to Klang Valley and Central Malaysia with additional 20% increase in total capacity for FY11.

- First and final dividend of 2.5sen per share proposed for FY10 providing a dividend yield of 2.5%.

- Maintaining FY11 forecast but upgrading FY12 net profit by 20% to RM18.3m (previously RM15.33m) on the back of 8.5% increased in revenue estimate to RM176.9m (previously RM162.9m). We revised our production output for the Taiping plant from 150m litres to 170m litres in anticipation of the new production line that is coming on by end CY2010.

- Maintain BUY with new target price of RM1.12 based on revised FY12 EPS forecast of 14.0 sen using PER of 8x. Our target price represents a 10% upside to the current share price as we are positive on the timing of new capacities in both Taiping and Shah Alam plants to take advantage of the improving market environment.

09/Sept/2010 Closing: RM1.02