PETALING JAYA: Life Water Bhd
is well-positioned to scale up rapidly and unlock its long-term earnings potential, underpinned by its dominant foothold in Sabah and vertically integrated operations.
Based in Sabah, Life Water was established in 2001 and is primarily involved in manufacturing and distributing bottled drinking water and flavoured beverages under its flagship brands, K2 and 2more.
According to MIDF Research, the group currently holds an estimated 11% share of Malaysia’s bottled water market, with a production output of 271.2 million bottles in financial year ended June 30, 2024 (FY24), fuelling a 17.2% revenue compounded annual growth rate (CAGR) over the past three years.
The research house noted that the persistent lack of access to treated water in Sabah – especially in rural areas – has created structural and recurring demand for bottled water, making Life Water the most direct and scalable proxy for monetising this unmet need.
“As Sabah’s water infrastructure challenges are likely to persist over the medium term, we believe Life Water is well-placed to capture sustained, high-frequency demand across both urban and rural markets – particularly in larger format products suited to daily household use.”
Looking ahead, Life Water is doubling down on growth.
The group is currently in the midst of a major production ramp-up that will more than double its annual capacity from 389 million litres to 804 million litres by FY27, through three new facilities in Keningau and Sandakan.
MIDF Research added that while full utilisation will take time, the expansion provides strategic capacity in anticipation of future demand.
The company is also eyeing new growth verticals, including portfolio diversification into flavoured beverages and market entry into Sarawak and Brunei.
Financially, MIDF Research projects a three-year revenue CAGR of 16% and core profit CAGR of 18%, driven by volume growth and cost efficiencies.
Profit margins are expected to benefit from easing polyethylene terephthalate resin prices, improved internal cost controls through in-house preform production and a shift toward more premium product offerings.
Life Water also maintains a minimum 20% dividend payout policy, with forecasted yields of 1.9% for FY25 and 2.2% for FY26.
MIDF Research has initiated coverage on the stock with a “buy” rating and a target price of RM1.04 per share, based on a 12 times price-to-earnings valuation on FY26 earnings of 8.7 sen per share.
“Our valuation is benchmarked against its closest peer, Spritzer Bhd, which trades at 12.5 times FY25 and 11.4 times FY26,” it added.
