‘Spritzer’s private placement exercise immaterial on FY17 earnings’

KUCHING: Spritzer Bhd’s ( Spritzer) private placement exercise is believed by analysts not to have material effect on the group’s financial year 2017 (FY17) earnings.

In a filing on Bursa Malaysia, UOB Kay Hian Securities ( M) Sdn Bhd announced on behalf of Spritzer’s board of directors that the company had on September 21, 2017 entered into a subscription agreement with Tasik Puncak Holdings Ltd ( Tasik Puncak) for a proposed private placement of 27,387,225 placement shares, representing 15 per cent of the issued shares of Spritzer, at an issue price of RM2.33 per placement share.

According to the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research), the exercise is not expected to have any material effect on the earnings of Spritzer for FY17.

“The new warehouse is expected to improve group’s productivity and efficiency,” it said.

“The newly automated warehouse is necessary to meet the increase in sales and production.”

MIDF Research believed that the new warehouse could help to boost Spritzer’s production efficiency due to the easing of the current bottleneck at the group’s current warehouse in Taiping.

“Furthermore, as the company could further increase its production capacity by another 20 per cent in the next two to three years through enhancements on its water production lines, the construction of the warehouse appear timely.”

Meanwhile, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) was neutral on the impact of the injection of cash into the group’s operations.

While this would eliminate funding concerns for the warehouse, which Kenanga Research believed would have otherwise be funded through a mix of debt and internal cash, the exercise may only translate to improving the group’s FY18E net interest expense position of circa RM1 million to a net interest income position of circa RM0.3 million.

“We do not expect the exercise to shift the operational landscape of the group significantly as we have accounted for the construction of the warehouse on the group’s long term outlook,” it said.

“However, the dilution of share base would erode shareholders’ value in FY18 given the 15 per cent larger share base.

The research arm expected FY17 to remain mostly unaffected with the proposed cash call to be completed by the fourth quarter of 2017 (4Q17).

Kenanga Research thus revised its FY18E earnings by 2.7 per cent, accounting for adjustments towards the research arm’s net interest income assumptions.

“The group should be poised to register a net cash position in FY18 with the increase cash resources,” it said.

However, the research arm’s dividend expectation for the year was trimmed to six sen, from 6.5 sen previously, due to the enlarged share base against an unchanged estimated pay- out ratio of circa 40 per cent.