Spritzr has just announced its results for QE31/5/2011, where its net profit dropped 88% q-o-q or 92% y-o-y to RM257k while turnover increased by 26% q-o-q or 12% y-o-y to RM43 million. The company attributed its poorer performance to higher sales of the lower-margin drinking water products thus affected the overall profit margin. Higher raw material costs and operating expenses together with the higher finance cost also contributed to the lower profit recorded. I think it is also possible that the company made short-term sacrifice to increase its market share in order to improve its utilization of its new Shah Alam plant.
Table: Spritzr's last 8 quarterly results
Chart 1: Spritzr's last 20 quarterly results
Valuation
Spritzr (closed at RM0.89 yesterday) is now trading at a PE of 14.4 times (based on last 4 quarters' EPs of 6.2 sen). At this PE, Spritzr is deemed full value. However, once it has consolidated its position & raise its selling prices, Spritzr's earning should improve.
Technical Outlook
Based on the chart below, we can see that Spritzr is still in an uptrend line, with support at RM0.85.
Chart 2: Spritzr's weekly chart as at July 25, 2011_plotted on log scale (Source: Tradesignum)
Conclusion
Despite the poorer results, I believe Spritzr is still a god stock for long-term investment.
5 comments:
Hi Alex,
Would the poor result of spritzer affect the performance result of YEELEE?
Hi Chun Mun
For QE31/3/2011, Spritzer contributed 8% of YEELEE's pre-tax profit. It is not a significant contributor to YEELEE's bottom-line. Nevertheless, YEELEE may also suffer some of the higher raw material costs and operating expenses that Spritzr suffered from. So, I do expect YEELEE's results to be affected. The question is how much?
Hi Alex,
Do you know why the market share price for spritzer keep dropping from Jan to March 2011.
Hi jar0517,
Look at the profit trend. It explains the decline in the share price. Anyway, Spritzr has good support at RM0.80-0.90.
The expanded capacity in Shah Alam would help to lower its cost of sales; thus increasing profit margin going forward. It is the most established mineral water brand in the country & it should do well. The current weakness could be a minor problem for a few quarters and then things should turn around.
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