KUALA LUMPUR: Spritzer Bhd
's trading stock saw buying interest on Monday, opening five sen or 2.12% higher at RM2.41 a share on the back of a proposed one-for-two bonus issue.
Last Friday, the bottle water manufacturer said the bonus issue would be fully paid at no consideration and without capitalisation of the company's reserves, as part of a strategy to enhance shareholder valule.
Malaysian Industrial Development Finance (MIDF) Research said in a note it was optimistic over the proposed bonus issue as it is expected to increase Spritzer's trading liquidity at a reasonable share price without affecting its market capitalisation.
"This could promote greater investor participation and perhaps expand the shareholder base of the company," it said.
Given that the issuance of the bonus issue has no significant impact on earnings, MIDF maintained its earnings prediction for FY23–25.
However, the research firm said it is expected to dilute the group’s earnings per share due to the enlarged share base post-completion of the proposed bonus issue.
MIDF maintained its "buy" recommendation and target price of RM2.80 pending the completion of the bonus issue. Post the bonus issuance, it anticipates that the target price would be adjusted to RM1.84 based on a diluted FY23F EPS of 13.3 sen.
On its finances, MIDF says Spritzer has a healthy balance sheet with a net cash position of RM5.6mil as at 4QFY22.
"Additionally, the group has had a proven track record of generating positive operating cash flow since it was listed.
"As such, this demonstrates that the group is financially sound and can keep producing cash flow to pay dividends ahead," it added.
Overall, the research firm said it is positive over Spritzer's outlook due to its defensive business nature, with improving demand for bottled water in Malaysia supporting sales volume.
It said there was also increased demand for out-of-home beverage consumption due to the return of tourists and normalising out-of-home activities post-reopening of the border.
The group's expansion plans for an additional mineral water plant also remains on track, said MIDF, following Sptrizer's recent acquisition of 1,227.6 acres of land in Bukit Gantang, Perak.
