KUALA LUMPUR (April 15): Life Water Bhd (KL:LWSABAH) is sailing with a tailwind as easing costs and a more premium product mix boost margins at the Sabah-based drink manufacturer, said MIDF Research.
Resin costs will fall along with oil prices, helping to lower packaging costs that account for more than half of its input purchases, MIDF Research said in initiating Life Water on a ‘buy’ call. The report marks the first-ever analyst coverage on Life Water since its listing on the Main Market in November 2024.
“These inputs are closely correlated with global crude oil prices,” MIDF Research said. “With oil prices trending lower, resin costs are expected to moderate further, providing a natural hedge that enhances Life Water’s cost efficiency and supports its operating leverage.”
Oil prices have declined about 13% since the start of 2025 amid rising output by key producers and weakening global demand amid escalating international trade tensions.
Shares of Life Water have declined nearly 20% so far this year. Investors who bought into Life Water’s initial public offering at 65 sen per share, however, are still up by 20% thanks to a surge in its early days on Bursa Malaysia.
The recent decline has pushed valuations of Life Water below that of its closest rival Spritzer Bhd (KL:SPRITZER) valued at 13 times the forward earnings. At about 10 times the projected 2025 earnings, Life Water is cheaper while commanding higher margins than Spritzer, MIDF Research noted.
MIDF Research has a target price of RM1.04 and the current share price of Life Water offers compelling value and “an attractive entry point, considering the group’s integrated business model, growing regional footprint, and consistent earnings delivery”, the research house said.
MIDF Research is forecasting about an average 18% annual net profit growth over the next three financial years ending June as revenue grows with capacity expansion.
This month, Life Water is also launching “Lemony”, a lemon-lime flavoured carbonated drink, positioned as a higher margin offering, MIDF Research said.
Further upside could come from the potential entry into Sabah’s untapped mineral water business that commands premium prices and offers “structurally stronger margins” than standard drinking water, the research house added.
