Growth on tap
BOTTLED water and drink manufacturer Life Water Bhd has outlined several strategies to mitigate the effects of global conflict, saying it remains optimistic about its upcoming quarterly performance despite ongoing geopolitical tensions.
Managing director Liaw Hen Kong says the Sabah-based company has so far managed to keep its main raw material costs under control, thanks to its bulk purchasing policy.
The company, whose core operations are heavily dependent on polyethylene terephthalate (PET) resin – the key raw material utilised to manufacture its bottled water and soft drink containers – is among many businesses affected directly by the disruptions in the Middle East.
“The unexpected sharp rise of PET resin price from around US$800 to US$900 per tonne to US$1,400 to US$1,500 per tonne has affected all bottled water manufacturers, including us,” Liaw tells StarBiz 7.
“Nevertheless, our bulk purchasing policy for preforms and resins in massive volumes will enable us to maintain our production costs for a about four to five months from early March.”
He says the recent softening of PET prices from their peak to around US$1,200 to US$1,300 per tonne would help ease raw material cost pressures on operations, moving forward.
Life Water, which produces drinks such as Sasa drinking water which is popular in Sabah, has also raised the prices of its products to help manage current and future challenges.
“Most existing bottled water manufacturers in Sabah, including ourselves, have implemented modest price increases to combat the rising cost challenges.
“On average, we have raised our bottled drinking water products’ selling prices by around 7% to counter rising PET resin prices and increased electricity tariffs in Sabah,” Liaw says.
“We are optimistic that our upcoming quarterly performance will remain intact and promising, baring any unforeseen circumstances.”
Life Water recently made corporate presentations at the Invest Malaysia conference and conducted post-results briefings where it earned a couple of upgrades from analysts covering the company.
Public Investment Bank (PublicInvest) Research analyst Lee Siao Ping upgraded his call on the stock to “outperform” while maintaining a target price of RM1.48.
Lee says the company’s near-term earnings should benefit from its recent price adjustments and lower-cost resin inventory, which are expected to drive temporary margin expansion in the fourth quarter (4Q26) of current financial year ending June 30, 2026 (FY26).
Following a softer quarter that coincided with the monsoon season, PublicInvest Research expects the warmer months of April to June to help 4Q26 outperform recent quarters
Over the longer term, growth is expected to be underpinned by capacity expansion, improving fulfilment capabilities and resilient demand for bottled water in Sabah, Lee adds.
Structured expansion
Lee notes that Life Water’s growth prospects benefit from robust demand for bottled water in Sabah, particularly during warmer weather conditions.
This is further boosted by improving fulfilment capabilities, regional expansion, branding initiatives, diversification into fast-moving consumer goods such as sauces and condiments, new product launches, and rising tourism activities.
“The group is also undertaking a structured expansion of its annual production capacity by circa 30% to 804 million litres by FY27 from 626 million litres currently, alongside ongoing efforts to enhance operational efficiency, optimise its supply chain, and strengthen cost controls.”
Meanwhile, CIMB Research analyst Walter Aw Lik Hsin points out that the company has implemented a 60 sen per carton selling price hike effective May 1, mainly to pass through the recent surge in PET resin prices and the 15% electricity tariff hike in Sabah since February.
Following the pullback in PET resin prices to around US$1,200 per tonne from a peak of circa US$1,400 per tonne in May, Life Water believes the price increase is sufficient to fully offset resin cost inflation at current levels.
Near-term margins should also be cushioned by the company’s remaining one to two months of low-cost resin inventory, locked in at US$850–US$900 per tonne, Aw says.
He reiterates his “buy” rating on the stock with an unchanged target price of RM1.77.
Beyond pricing, Life Water expects further support from higher operating leverage as production volumes increase, as well as tighter cost controls, greater automation and more efficient production equipment, he adds.
Aw’s RM1.77 target price is based on 18 times 2027 price-to-earnings ratio (PER), representing a discount of circa 20% to bottled water peers’ 22.6 times 2027 PER.
In its corporate presentation slides, Life Water says demand growth driven by higher incomes, evolving consumer preferences and growth of tourism spurred by Visit Malaysia 2026 is expected to be among the key catalysts for the group.
“Continued tourism-related activity, particularly in the lead-up to Visit Malaysia 2026, are expected to underpin consumption within the beverage segment,” it said.
For 3Q26 ended March 31, 2026, Life Water posted a net profit of RM8mil on sales of RM48.5mil, compared with a net profit of RM6.5mil on sales of RM43.1mil a year earlier.
For the nine months ended March 31, 2026, net profit rose to RM26.2mil on revenue of RM150.3mil, compared with RM21mil on revenue of RM128.4mil previously.
At last look, Life Water was trading at RM1.40 apiece, giving the group a market capitalisation of RM663mil.