“Water” Themed Stocks] Spritzer | 12Invest

Note: The stock price of Sprtizer Berhad (SPRITZER, 7103) has reached a record high. I would like to remind everyone that it is risky to go higher before you start reading the text!

Today, SPRITZER, which the moderator has been watching for a long time, hit a new high stock price today (well, I haven't bought anything yet). Apart from the Kuala Lumpur water outage which led to indirect sales promotion, the company's record high in the most recent quarter, or FY2024 Q1, also helped drive the stock price.

Judging from the quarterly report, SPRITZER's revenue is RM135.0 million, and profit after tax (“PAT”) is RM15.5 million. At the same time, the company should have met with some funds in the near future, so the stock price is so strong.

I believe everyone knows that SPRITZER is a well-known domestic mineral water brand, and the company's market rate for bottled water (“bottled water”) in Malaysia should be around 40.0% to 50.0%, while the market rate for mineral water should be even higher.

**Mineral water and bottled water are two different concepts, we'll explain later ~

So, what competitive advantage does this mineral water company have, why is it doing better in the near future, and what are its future prospects?

Today in our article, let's take you to learn more about the SPRITZER company~

Brief introduction; SPRITZER officially began producing bottled water in 1989 and was officially listed in Malaysia within 2000. The company's main business is the production and sale of mineral water and drinking water.

To date, the company is also the largest one-stop bottled water producer in Malaysia, which means that everything from obtaining the water source to making the bottle and selling it in the package is done in the company's plant.

Why is SPRITZER's flagship product (that is, natural mineral water with a blue lid) so popular and sells for a higher price than ordinary drinking water?

In fact, the most important thing here is that SPRITZER's mineral water is rich in silicon minerals (“Silica Minerals”), and drinking mineral water with silicon minerals regularly helps improve health, so its price is higher than ordinary purified (“purified”) drinking water.

Next, let's talk about SPRITZER's competitive advantages.

They all mentioned “mineral water”. Of course, “mineral water” and “water” are the most important resources. According to personal knowledge, SPRITZER owns 390 acres (“Acres”) of rainforest (“Acres”) of rainforest in Taiping (which has now expanded to 406 acres), and the nature of rain in the rainforest for a long time, and the company's factory building is located in a nearby area, making it the best resource for the company to obtain “raw materials.”

So when we usually drink SPRTIZER with a blue cap, it's mainly produced in Taiping~

Of course, the company also has 42 acres and 7 acres of land in Yongping (Johor) and Shah Alam respectively responsible for producing mineral water and drinking water, but they mainly use other brands such as Summer, DESA, and Cactus.

In addition to water, SPRITZER's other main raw material is actually “PET Resin” (“PET Resin”); in FY2024 Q1, the average cost of SPRITZER's PET Resin is about RM4.39/kg, which is quite low compared to the same period last year, so we have achieved very good results, but in fact, there is another point that I personally think SPRITZER is very good.

Since the past, we have seen that many bottled water designs have not changed much, but SPRITZER's packaging will see changes for a long time, so why the change? Is it simply appealing to consumers?

That's just one of them. More importantly, SPRITZER's real purpose is to reduce the amount of plastic, thereby reducing their production costs, but there isn't much difference for consumers.

However, since bottle caps require harder plastic, the only plastic cost for bottle caps has not changed much over the years; instead, there has been an increase in the use of recycled plastic (which will be more expensive); SPRTISER itself is also continuously encouraging consumers to recycle their plastic bottles.

Overall, SPRITZER's main competitive advantage lies in having natural rainforest resources that other companies don't have, and their cost control, such as reducing plastic content in bottles, and their willingness to invest heavily in automation.

For example, when the previous moderators visited their factory, they saw that their automated warehouse system (“ASRS”) is very efficient, reduces the dependence on labor, and ASRS is not cheap and requires a very high CAPEX.

Next, can SPRITZER grow?

Looking back at the FY2024 Q1 performance, the company mentioned that the growth in performance was mainly due to increased sales and an increase in profit margin (plastic cost reduction); the company also invested RM28.9 million in capital expenses (“CAPEX”) into two new production lines during the quarter, increasing the company's production capacity to 1200 million litres. Over the year, the company should expect to reach RM70.0 million to RM80.0 million CAPEX.

In the future, SPRITZER will mainly enter the market of more hotels, restaurants, cafes, etc. (“HoReCa”), and at the same time strengthen the bottled water market rate in Xinpo to achieve the goal of growth.

Overall, I am very optimistic about SPRITZER's mid-term development.

The last question is, can SPRITZER's stock price rise in the future?

We can't predict stock prices, but the company's top 30 shareholders are mainly the privatized Yee Lee Corporation Berhad (“Yee Lee”) and various institutional investors. The shareholding ratio is about 85.48%, which means that tradable shares in the market are already very low. Moreover, the moderator feels that people are absorbing stocks recently, which is very interesting from the perspective of capital flow.

However, the moderator is more concerned about whether SPRITZER's performance can continue to rise, which is the most critical point.

Photo source: taken from Spritzer's official website

Disclaimers:

The moderators are not licensed stock analysts, so we don't provide any trading advice. If necessary, you can ask a licensed stock analyst or licensed stock broker.

The current status of the moderator is iFAST Capital Sdn. Bhd. He is also the Marketing Representative of TA Securities Holdings Berhad, and is an independent financial content writer and provides financial advisory services.

At the time of writing this article, or in the short term (within 3 months), the moderators themselves are interested in investing in or already holding the above companies, unless a new one appears, so readers must check the independence of the content.

Finally, the content shared above is all information, news, and content obtained by individuals through various channels; all content mentioned in the article can only be used for reference, learning, education, and information purposes, and is by no means any professional financial, investment, or trading advice. If you want trading advice, please consult a professional stock analyst or investment bank, and then judge the risks and potential benefits yourself. I would like to state once again that 12Invest is in no way responsible for the accuracy, completeness, correctness, or validity of any content or opinions shared. All decisions made after reading the article are the responsibility of the readers themselves. Remember, any investment involves risk, so take steps to protect yourself.

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