Spritzer’s second half of 2016 to outperform previous half

KUCHING: Spritzer Bhd’s (Spritzer) second half of 2016 (2H16) has been projected by the research arm of Kenanga Investment Bank Bhd (Kenanga Research) to outperform 1H16.

According to Kenanga Research, 2H16 is expected to outperform 1H16, as the research arm projected better sales due to seasonality factors during this period.

“This is also supported by historical precedents in FY13-FY15 where the second half of the financial year reported notable improvements compared to first half,” it said.

Kenanga Research assumed product prices in its forecasts to be inline with FY14-FY15’s estimated average and project 2H16 to record RM164 million in sales following 1H16 sales of RM132.3 million.

The research arm noted that backed by better efficiency and sales volume, FY16E is poised to achieve net sales of RM278.1 million (up 9.6 per cent year on year (y-o-y)) with profit before tax (PBT) and net profit (NP) of RM36.3 million (up 13.4 per cent y-o-y) and RM25.9 million (up 13.4 per cent y-o-y), respectively.

With the FYE change to December in 2016, the research arm believed Spritzer’s performance could carry on to the first nine months of 2016 (9M16) period with RM457.4 million revenue, and RM42.5 million NP, representing growth against FY15 of 80.3 per cent and 86.4 per cent, respectively.

Moving forward, Kenanga Research believed the existing cornerstone of Spritzer is capable of driving the group’s performance backed by plenty of expansion space in terms of production levels (current utilisation rate stands at circa 70 per cent of 600 million litres).

“FY17E is expected to generate RM306.1 million revenue, PBT of RM38.7m and an ending NP of RM27.6 million, representing y-o-y growth of 10.9 per cent, 9.9 per cent and 10.2 per cent, respectively against FY16E,” it said.

However, the research arm would like to give consideration in the event Spritzer raises the group’s utilisation rate to circa 80 per cent with a net effect of FY17E earnings per share (EPS) of 23.9 sen.

Despite having a ‘not rated’ stance on the stock, Kenanga Research believed Spritzer should be valued within a range of RM2.31-RM2.75 (or RM2.53 on average), implying a FY17E price earnings ratio (PER) of 11.5-fold (broadly in-line with the FY15-FY17E NP compound annual growth rate (CAGR) of 11.8 per cent and historical three-year price/earnings to growth (PEG) ratio of circa one-fold).

This was based on the research arm’s FY17E EPS of 20.1-23.9 sen from the plant utilisation rate assumption of 70 per cent-80 per cent.

 

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