MIDF maintain Buy Recommendation for Spritzer

MIDF maintain Buy Recommendation for Spritzer

MIDF Research has maintained a “BUY” recommendation for Spritzer Bhd with an unchanged TP of RM2.63

It said that its TP is derived from an unchanged valuation of 17.5x PER pegged to FY22F EPS of 15.1 sen.

It said that despite the near-term challenges, MIDF believes that the demand for bottled water is likely to increase in tandem with the recovery in economic activities as the pandemic eases.

“We believe that Spritzer will benefit from recovery in consumption given its market leading position in the bottled drinking water segment. Spritzer’s balance sheet remains sturdy with a cashpile of RM27.3million alongside other investments of RM71.7million

“Downside risk to our call includes further lockdowns in the country and a sharp increase in packaging raw material costs. Dividend yield is estimated at 2.2%,” the research house opined.

Reviewing its performance, MIDF says Spritzer is poised to recover to its previous level and could continue to grow due to its market leadership and operational efficiency.

In the meantime, MIDF said that it cut FY21E earnings by 20.9% due to higher input cost and the high number of Covid-19 cases in Malaysia at the moment.

It said that the  Enhanced Movement Control Order implement in July is expected to cap demand for bottled water, which will dampen ASP. “On top of that we also expect high PET resin cost to continue to put pressure on its input cost. That said, we believe that the company is still on track for a more normalised growth in FY22F, so we keep our estimates unchanged,” MIDF says.

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