LWSABAH: Financial Performance Exceeds Expectations on Robust Sales and Efficiency Gains

A recent research report has highlighted a strong financial performance for the quarter, leading to an ‘Outperform’ rating being maintained by PublicInvest Research. The investment bank has also revised its target price upwards, signaling confidence in the company’s strategic growth initiatives and operational efficiencies.

For the first quarter of fiscal year 2026 (1QFY26), the company reported a headline net profit of RM9.4 million, marking a significant 25.1% year-on-year increase. Its core net profit stood at RM9.6 million. These results were broadly in line with both PublicInvest Research’s and consensus expectations, accounting for 28% and 26% of full-year forecasts, respectively. This performance has prompted PublicInvest Research to raise its FY26-28F forecast by an average of 12%.

Performance Review

Revenue for the quarter surged by 20.3% year-on-year to RM51.2 million. This significant growth was primarily attributed to higher sales volumes, bolstered by increased production capacity at the Sandakan Sibuga Plant 1, which was expanded in June 2025. The consolidation of Twinine’s sauces and condiments business also contributed to the revenue uptick. The company demonstrated improved operational efficiency, leading to a core net profit margin expansion from 17.9% in 1QFY25 to 18.8% in 1QFY26. The gross profit margin also saw an increase from 47.7% to 48.5%. However, this improvement was partially moderated by higher labour costs, influenced by the implementation of the minimum wage policy, and the integration of Twinine’s operations, which have a different cost structure.

Future Outlook

PublicInvest Research remains positive on the company’s prospects, highlighting several key growth drivers. The company is actively strengthening its geographical footprint, particularly in Sarawak and Brunei, and is enhancing its product portfolio with new launches. Growth is expected to be further supported by ongoing capacity expansion plans and anticipated rise in tourism activities in Sabah, ahead of Visit Malaysia 2026. Notably, the company targets to boost its drinking water production capacity to 804 million litres per annum by FY27F, having already completed a new manufacturing line at Sandakan Sibuga Plant 1, increasing its annual capacity to 626 million litres. Analysts are also optimistic about the demand outlook for the company’s products. Furthermore, the weakening of the USD against the ringgit is expected to benefit the company, as approximately 50% of its raw material costs are imported. Reflecting these strong fundamentals, PublicInvest Research has also re-rated the company’s valuation, revising the target P/E from 12x to 15x CY26F EPS to align with the consumer sector’s average. The target price is now revised to RM1.35 from RM0.95.