PETALING JAYA: Life Water Bhd
’s RM46.8mil proposed acquisition of a 90% stake in Hung Tai Group (HTG) will likely lift its earnings by up to 10% while accelerating its expansion into the fast-moving consumer goods (FMCG) staples segment, analysts say.
The acquisition involves three Sabah-based food manufacturing, wholesale and distribution companies – Hung On Thong Mini Supermarket Sdn Bhd, Hung Tai Enterprise (Sabah) Sdn Bhd (HTE) and Kilang Mee Ban Soon Sdn Bhd.
Collectively, the three companies posted a net profit of RM7.6mil and net assets of RM28.4mil for the financial year ended Dec 31, 2025 (FY25). The vendors have also provided a two-year profit after tax (PAT) guarantee of RM7.5mil annually for the financial years ending June 30 FY27 and FY28.
CIMB Research expects HTG to contribute RM4.5mil and RM5.1mil to Life Water’s net profit in FY27 and FY28 respectively, after accounting for financing costs.
This, it said, will lift Life Water’s forecasted earnings per share by 10.3% in FY27 and 10.2% in FY28, assuming the transaction is completed by end-October 2026.
“We gather from Life Water that the vendors will retain the remaining 10% stake and continue to run HTG’s operations for at least five years, ensuring business continuity post acquisition,” it said.
Meanwhile, MBSB Research estimates the acquisition could lift earnings by about 7% in FY27, assuming eight months of consolidation, and by about 10% in FY28, with further upside if synergies materialise.
“For illustration, anchoring on the RM7.5mil guaranteed PAT floor, a 90% attributable stake and after deducting estimated funding costs, we estimate a net incremental PAT run-rate of approximately RM5.3mil per annum,” it noted.
Both research houses view the acquisition positively, saying it marks another step in Life Water’s diversification beyond bottled water into the defensive consumer staples segment following its RM10.5mil acquisition of Twinine Sdn Bhd in May.
HTG brings established household brands, manufacturing capabilities and a 30-year operating track record in staple food products including rice, rice noodles, sauces, condiments and noodles.
MBSB Research said HTE is the core asset, accounting for 64% of the consideration.
The businesses also have an existing distribution network across Sabah, Sarawak, Labuan and Brunei. This complements Life Water’s own network of more than 90 trucks and over 5,000 customer touchpoints in Sabah and Sarawak, analysts said.
Analysts expect the enlarged group to benefit from cross-selling opportunities and operational synergies across manufacturing, procurement, logistics, distribution and administration, while strengthening Life Water’s presence in the Sabah consumer staples market.
CIMB Research maintained its “buy” call on Life Water with an unchanged target price (TP) of RM1.77, noting the potential earnings (PE) contribution from the acquisition has yet to be reflected in its valuation.
The TP is based on 18 times calendar year 2027 earnings, representing about a 20% discount to bottled water peers’ average valuation of 22.6 times. “That said, if we impute HTG’s annual profit guarantee of RM7.5mil for FY27 to FY28, our theoretical TP would rise to RM1.95 based on unchanged target PE multiple,” it added.
MBSB Research maintained its “buy” recommendation and raised its TP to RM1.73 from RM1.63 after increasing its TP-earnings multiple to 17 times from 16 times, citing improved earnings diversification and the accretive potential of the acquisition.
