Is Spritzer an investment opportunity?

Value Investing Case Study 92-1: This bottled water stock is beating the market - and no one is noticing

When you think of listed consumer staples in Malaysia, bottled water might not be the first thing that comes to mind. Yet, Spritzer Bhd (Spritzer or the Group), the country’s largest bottled water producer, has quietly built a dominant position in this steady, essential sector.

With over three decades of operations, Spritzer is well-known for its flagship brand and has continued to expand into premium and functional hydration products. While the company has long flown under the radar, its recent financial performance and strategic moves have turned heads.

I will look closely at Spritzer’s operating performance, financial strength, and valuation in this article. I will also benchmark it against global bottled water players to assess whether Spritzer might just be one of the undervalued gems on Bursa Malaysia despite its modest profile.

My analysis showed that the Group is fundamentally sound and is trading with a 31% margin of safety. Should you go and buy it? Well, read my Disclaimer. 

Contents

• Company background

• Operating performance

• Financial position

• Valuation

• Conclusion

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Company background

Spritzer is principally involved in the manufacturing, marketing, and selling of a comprehensive range of bottled water products. The company is the largest and most integrated bottled water producer in Malaysia, with a market share of about 40% in the local bottled water industry.

Over the past decade, Spritzer has undergone a significant transformation. It evolved from a strong domestic bottled water brand into a more diversified, sustainability-driven, and digitally adaptive organization. 

• 2015–2016: Primarily focused on natural mineral water with a strong emphasis on purity, source depth (420 feet), and zero human contact in bottling. Brands included Spritzer, Cactus, Desa, and Summer.

• 2023–2025: Expanded hydration offerings with functional waters (e.g., Spritzer BonRica with prebiotics), flavoured water, sparkling variants, and associated beverages via a 30% stake in The Tapping Tapir.

In addition to water, the Group today also:

• Manufactures PET preforms, PET bottles, caps, toothbrushes, and other plastic products.

• Operates a mini golf course and recreational park - Spritzer EcoPark.

The Malaysian bottled water sector is a mature one as exemplified by the following:

“From 2018 to 2022… the annual sales revenue of bottled water in Malaysia… experiencing a CAGR of 0.03%... will expand to a size of USD 522 million by 2032, registering a…CAGR of approximately 5.7% from 2023 to 2032.” Research and Markets

According to Statista, the Malaysian bottled water industry can be segmented into:

• At home (e.g., revenue generated in supermarkets and convenience stores) amounted to USD 216 m in 2025. This segment is projected to grow by 2.56% CAGR (2025-2029).

• Out-of-home (e.g., revenue generated in restaurants and bars) of USD 63m in 2025.

Operating performance

From 2015 to 2024, Spritzer’s revenue grew at 9.6 % CAGR. This is good revenue performance, given the market research reports. The other positive picture was that PAT grew at a higher rate of 13.5 % CAGR over the same period. 

But as can be seen from Chart 1, the bulk of the revenue and profit growth came post-2021. This was driven by a combination of economic recovery post-pandemic, higher demand, and internal improvements. 

• As Malaysia reopened post-COVID, bottled water consumption rebounded sharply, boosted by increased mobility, tourism, and health awareness.

• Spritzer capitalized on this with expanded production capacity - reaching 1 billion litres by 2022 - and investments in automation and industry 4.0 technologies, which improved efficiency and lowered costs. 

• The company also introduced higher-margin products like Spritzer Sparkling and BonRica and strengthened branding around wellness and sustainability.

• A better sales mix, effective pricing, and improved distribution - especially via digital channels - further supported growth. These strategic moves allowed profitability to outpace revenue.

Chart 1: Performance Index and Operating Profit

Note to Op Profit. 

I broke down the operating profits into fixed costs and variable costs

• Fixed cost = SGA, Depreciation & Amortization and Others.
• Variable cost = Cost of Sales that excluded Depreciation & Amortization.
• Contribution = Revenue – Variable Cost.
• Contribution margin = Contribution/Revenue.

However, Spritzer experienced margin compression in 2024 that led to a decline in the contribution margin due to rising operating costs. Refer to the right part of Chart 1. Despite these cost pressures, Spritzer still achieved higher overall profits in 2024 due to strong revenue growth, lower fixed costs and a lower tax rate.

Note that the 2024 tax rate was 10% compared to the average 24% tax rate over the past decade. This was due to tax incentives related to its reinvestment efforts.

The improved profits post-2021 led to improved returns after many years of decline. Refer to Chart 2. But the improving returns over the past few years were not driven by better capital turnover. This is also supported by the flattish gross profitability as shown in the left part of Chart 1. 

I have already mentioned that the better operating profit margin in 2024 was boosted by the tax incentives and may not be as sustainable as the improvement in capital efficiency.

Chart 2: Returns and ROIC Drivers

Note that I tend to focus on ROIC as the key return metric. This metric tells you how effectively the company turns invested capital into profit. If ROIC exceeds the cost of capital, the business is creating value.

In this context, the ROIC over the past decade ranged from 5.1 % to 13.1 %, with an average of 9.0%. The average is higher than the current WACC of 7.0 %, indicating that the Spritzer created shareholder value. 

Peer comparison

Spritzer is currently the only bottled water company in Bursa. As such, to get an idea of how well it performed compared to its peers, I compared Spritzer's performance with the following global companies.

• Nestlé S.A. (NESN). A Swiss multinational food and beverage company, Nestlé owns several bottled water brands such as Perrier, S.Pellegrino, and Pure Life. 

• Primo Water Corporation (PRMW) Headquartered in Tampa, Florida, Primo Water offers bottled water, water dispensers, and filtration services across North America and Europe. 

• Coca-Cola Europacific Partners Plc. (CCEP) The world's largest Coca-Cola bottler by value, this British multinational produces and distributes beverages, including bottled water brands like Glacéau Smartwater and Dasani, across Europe and the Asia-Pacific region. 

• Nongfu Spring Co., Ltd. (9633) A Chinese company recognized as the leading bottled water producer in China, Nongfu Spring also offers a range of beverages, including teas and juices. 

Given the significant differences in revenue levels, I found it more meaningful to compare relative ratios rather than absolute metrics. Spritzer’s performance was moderate when benchmarked against its global peers based on the following indicators:

• Its return on capital and EBIT margin were in line with the industry average (see Chart 3).

• Spritzer recorded a lower and more volatile levered free cash flow margin compared to peers (refer to the left side of Chart 4).

• While Spritzer’s EPS was the most stable among the group, it remained relatively low throughout the period.

Chart 3: Peer Return on Capital and EBIT Margin

Chart 4: Peer Levered Free Cash Flow Margin and EPS

Case Notes Peer comparison is key in fundamental analysis. For Spritzer, the only local peer is Life Water Bhd (listed in 2024), so comparing it with global bottled water players makes more sense. Pros: Offers benchmarks in innovation, sustainability, operations, and marketing. Shows Spritzer’s positioning in the global bottled water scene. Global leaders serve as aspirational models—useful if Spritzer expands exports or premium lines. Cons: Vast differences in size, reach, and business models can blur performance insights. Operate in diverse markets - costs and consumer behaviour differ. Many global peers are part of large F&B groups, making bottled water data less transparent. As you can see, there are many issues to consider when carrying out a fundamental analysis of companies in this sector. This requires expertise and time.  Visualizing a company’s business performance and investment risk (by comparing market price with intrinsic value) is one way to shortcut the process. The Fundamental Mapper helps investors make informed decisions as it provides such insights in an easy-to-see format. Download the Fundamental Mapper app now on Xifu to get investment insights into Bursa Malaysia companies

Case Notes

Peer comparison is key in fundamental analysis. For Spritzer, the only local peer is Life Water Bhd (listed in 2024), so comparing it with global bottled water players makes more sense.

Pros:

• Offers benchmarks in innovation, sustainability, operations, and marketing.

• Shows Spritzer’s positioning in the global bottled water scene.

• Global leaders serve as aspirational models—useful if Spritzer expands exports or premium lines.

Cons:

• Vast differences in size, reach, and business models can blur performance insights.

• Operate in diverse markets - costs and consumer behaviour differ.

• Many global peers are part of large F&B groups, making bottled water data less transparent.

As you can see, there are many issues to consider when carrying out a fundamental analysis of companies in this sector. This requires expertise and time. 

Visualizing a company’s business performance and investment risk (by comparing market price with intrinsic value) is one way to shortcut the process. The Fundamental Mapper helps investors make informed decisions as it provides such insights in an easy-to-see format.

Download the Fundamental Mapper app now on Xifu to get investment insights into Bursa Malaysia companies

Case Notes

Peer comparison is key in fundamental analysis. For Spritzer, the only local peer is Life Water Bhd (listed in 2024), so comparing it with global bottled water players makes more sense.

Pros:

• Offers benchmarks in innovation, sustainability, operations, and marketing.

• Shows Spritzer’s positioning in the global bottled water scene.

• Global leaders serve as aspirational models—useful if Spritzer expands exports or premium lines.

Cons:

• Vast differences in size, reach, and business models can blur performance insights.

• Operate in diverse markets - costs and consumer behaviour differ.

• Many global peers are part of large F&B groups, making bottled water data less transparent.

As you can see, there are many issues to consider when carrying out a fundamental analysis of companies in this sector. This requires expertise and time. 

Visualizing a company’s business performance and investment risk (by comparing market price with intrinsic value) is one way to shortcut the process. The Fundamental Mapper helps investors make informed decisions as it provides such insights in an easy-to-see format.

Download the Fundamental Mapper app now on Xifu to get investment insights into Bursa Malaysia companies

Case Notes

Peer comparison is key in fundamental analysis. For Spritzer, the only local peer is Life Water Bhd (listed in 2024), so comparing it with global bottled water players makes more sense.

Pros:

• Offers benchmarks in innovation, sustainability, operations, and marketing.

• Shows Spritzer’s positioning in the global bottled water scene.

• Global leaders serve as aspirational models—useful if Spritzer expands exports or premium lines.

Cons:

• Vast differences in size, reach, and business models can blur performance insights.

• Operate in diverse markets - costs and consumer behaviour differ.

• Many global peers are part of large F&B groups, making bottled water data less transparent.

As you can see, there are many issues to consider when carrying out a fundamental analysis of companies in this sector. This requires expertise and time. 

Visualizing a company’s business performance and investment risk (by comparing market price with intrinsic value) is one way to shortcut the process. The Fundamental Mapper helps investors make informed decisions as it provides such insights in an easy-to-see format.

Download the Fundamental Mapper app now on Xifu to get investment insights into Bursa Malaysia companies

Financial position

I would consider the Group as financially strong. While the Group had a high Reinvestment rate, this was more than offset by the positive points. Its positives were:

• As of Dec 2024, it had RM 43 million in cash. This is equal to 6 % of its total assets. 

• As of Dec 2024, it had a debt-equity ratio of 9 %. This has come down from its 2015 high of 20 %.

• Over the past decade, it generated positive cash flow from operations every year. During this period, it generated RM 520 million in cash flow from operations compared to the total PAT of RM 334 million. This is a good cash flow conversion ratio.

• It had a good capital allocation plan. Refer to Table 2. The cash flow from operations was sufficient to fund its CAPEX.

Table 1: Sources and Uses of Funds 2015 to 2024

I see the high Reinvestment rate as the main negative point. Over the past decade, this averaged 100 %, meaning that there was no NOPAT left for the shareholders. But a big part of this was for its plant expansion. I expect the Reinvestment rate to come down with the completion of the expansion plan. Furthermore, the improving profits will also drive down the Reinvestment rate. 

Valuation

My analysis showed that Spritzer operates in a mature sector and that its business post-2021 is more representative of its future performance. I thus valued it based on the following picture.

• The base revenue would be the 2024 revenue. Revenue would grow at 4 % in perpetuity.

• The base contribution margin would be the average 2021 to 2024 margin. I assumed that there would not be any improvement in the contribution margin.

• The base reinvestment rate would follow the past decade average. I assumed that there is no reduction in the reinvestment rate.

• The base fixed cost would be the 2021 to 2024 average value.

• The tax rate would be the average 2015 to 2024 positive tax rates.

On such a basis, I obtained an intrinsic value of RM 1.88 per share compared to its market price of RM 1.44 per share (8 Apr 2025). There is a 31 % margin of safety.

Valuation model

I valued Spritzer based on a single-stage valuation model, as shown in Table 2. The single-stage DCF model is suitable for mature, stable businesses with predictable growth. It assumes a constant growth rate into perpetuity, simplifying valuation while still capturing long-term value.

The basic equations used in the model are:

Free Cash Flow to the Firm or FCFF = EBIT(1 – t) – Reinvestment.

EBIT = Revenue X Contribution margin – Fixed cost. The earning was based on the business model shown in the left part of Chart 1.

Reinvestment was derived from the Reinvestment margin.

Table 2: Sample calculation 

The cost of funds was based on the first page results of a Google search for “Spritzer WACC”. Refer to Table 3.

Table 3: Estimating the cost of funds

Risks and limitations

The crux of my valuation is that the post-2021 performance can be sustained. 

• Post-COVID demand is sticky. Recovery in tourism, mobility, and health awareness continues to support stable bottled water consumption.

• Premium products lift margins. New offerings like BonRica and Spritzer Sparkling tap into wellness trends and improve profitability.

• Automation boosts scalability. Investments in capacity and Industry 4.0 enable cost-efficient growth.

• Stronger digital presence. Improved distribution through online and retail channels expands reach and brand stickiness.

• Incentivised reinvestment. Tax benefits tied to reinvestment signal proactive capital allocation and long-term productivity gains.

• Robust financials. Strong cash flow and low debt provide a solid base to sustain performance and fund growth.

You can see that the above reflects strategic shifts in product, process, and positioning - underpinned by market recovery and operational upgrades. While risks remain (e.g., input costs, competitive pressure), the foundation for sustained performance is in place.

Nevertheless, I believe that I have taken an optimistic approach in my valuation, as illustrated in Chart 5

• The projected FCFF is much larger than the historical one. The historical FCFF is also more volatile.

• The projected contribution margin of 57 % is more stable compared to the past few years. It assumed that the Group would recover from its 2024 low.

• The average projected ROIC of 15 % is also much higher than the 2024 ROIC of 13%.

• The projected Reinvestment rate of 61% is much lower than the historical 100%.

Chart 5: Projection vs History

Is there any upside? There are two potential upsides:

• I have assumed that the Group growth would slow down immediately to follow the long-term GDP growth rate. If it continues with the historical growth rate from some time, the intrinsic value would be higher.

• I also assumed that there is no significant improvement in the Reinvestment rate. A reasonable rate would be one following the growth equation of growth = Return X Reinvestment rate. Based on the projected 4% growth rate and 15% ROIC, the fundamental Reinvestment rate would be 27%. At this rate, the intrinsic value would be higher.

The positive point is that even ignoring the upside, there is a 31% margin of safety. 

Conclusion

Spritzer has emerged from the pandemic stronger - with improving profits, strategic product diversification, and a solid financial foundation. While 2024 showed margin pressure, the Group’s long-term fundamentals remain intact, supported by automation, brand equity, and a maturing market.

Valuation-wise, there is a 31% margin of safety based on conservative assumptions. Even without factoring in potential upsides from better growth or a lower reinvestment rate, Spritzer appears undervalued.

Still, risks remain. Rising costs, limited capital efficiency gains, and slower growth may cap long-term returns. Yet, for value investors seeking a steady, well-managed business with reasonable upside, Spritzer offers a compelling case.

Verdict: A fundamentally sound company trading below intrinsic value. Worth a place on your watchlist or portfolio.

Investment thesis

Spritzer is Malaysia’s leading bottled water company with a 40% market share in a stable, recession-resistant sector. Since 2021, it has posted strong revenue and profit growth, driven by premium products, automation, and post-pandemic recovery.

Financially sound with low debt and strong cash flow, Spritzer remains undervalued. Its intrinsic value is RM1.88 vs. a market price of RM1.44, offering a 31% margin of safety.

With upside from product innovation and a stake in The Tapping Tapir, Spritzer is a steady, well-managed business with solid long-term potential - ideal for value investors.

Case Notes An investment thesis is a vital tool for any investor because it provides clarity, focus, and direction in decision-making. Learning how to draft an investment thesis is crucial for investors, especially those who want to make well-informed, rational, and successful investment decisions.  It defines your reasoning. A clear thesis encourages disciplined decision-making. It helps assess risks. It provides a benchmark to evaluate whether the investment is performing as expected. An investment thesis is not set in stone - it is a living document. If the facts change, you can update your thesis or adjust your investment accordingly. This approach keeps you grounded and aligned with your investment principles.

Case Notes

An investment thesis is a vital tool for any investor because it provides clarity, focus, and direction in decision-making. Learning how to draft an investment thesis is crucial for investors, especially those who want to make well-informed, rational, and successful investment decisions. 

• It defines your reasoning.

• A clear thesis encourages disciplined decision-making.

• It helps assess risks.

• It provides a benchmark to evaluate whether the investment is performing as expected.

An investment thesis is not set in stone - it is a living document. If the facts change, you can update your thesis or adjust your investment accordingly. This approach keeps you grounded and aligned with your investment principles.

Case Notes

An investment thesis is a vital tool for any investor because it provides clarity, focus, and direction in decision-making. Learning how to draft an investment thesis is crucial for investors, especially those who want to make well-informed, rational, and successful investment decisions. 

• It defines your reasoning.

• A clear thesis encourages disciplined decision-making.

• It helps assess risks.

• It provides a benchmark to evaluate whether the investment is performing as expected.

An investment thesis is not set in stone - it is a living document. If the facts change, you can update your thesis or adjust your investment accordingly. This approach keeps you grounded and aligned with your investment principles.

Case Notes

An investment thesis is a vital tool for any investor because it provides clarity, focus, and direction in decision-making. Learning how to draft an investment thesis is crucial for investors, especially those who want to make well-informed, rational, and successful investment decisions. 

• It defines your reasoning.

• A clear thesis encourages disciplined decision-making.

• It helps assess risks.

• It provides a benchmark to evaluate whether the investment is performing as expected.

An investment thesis is not set in stone - it is a living document. If the facts change, you can update your thesis or adjust your investment accordingly. This approach keeps you grounded and aligned with your investment principles.

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If the above article was useful, you can find more insights on how to make money in my e-book. The e-book is now available from Amazon, Kobo and Google Play.

PS: If you are in Malaysia or Singapore, the e-book can only be download from Kobo and Google Play. 

Disclaimer & Disclosure

I am not an investment adviser, security analyst, or stockbroker.  The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies.   Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them. 

The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such. 

I may have equity interests in some of the companies featured.

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