OldTown to gain from lower interest rates as consumer spending to rise.
KUALA LUMPUR: The 25 basis points (bps) cut in the Overnight Policy Rate (OPR) by Bank Negara will be positive for both consumer and businesses due to improved cashflows, but marginally negative for banks, said Maybank Investment Bank (IB) Research.
The research house said in a note on Thursday that there was no change in the earnings, target prices and calls for stocks under its coverage as it estimated the impact to be small.
Bank Negara decided to reduce the OPR to 3% (- 25bps) during its Monetary Policy Committee meeting on Wednesday.
The research house said that Bank Negara, during the meeting, talked about “increasing signs of moderating growth momentum in the major economies” and global growth prospects being more susceptible to higher downside risks from “possible repercussions” from Brexit.
Maybank IB Research said potential beneficiaries from improved demand due to the OPR cut were smaller ticket consumer staples or discretionaries in retail such as AEON and Padini and F&B such as Nestle, OldTown, and BFood.
Indirectly, the retail REITs may also benefit from higher turnover rent - IGB REIT (12-13%), KLCCP, Pav REIT (both 3-5%), SunREIT, CMMT (both about 3%).
“But, we do not think the 25bps OPR cut is enough to shift demand in the bigger ticket auto and property sectors.
“For property, the key determining factor is still the ability to secure mortgages,” it said.
As for the impact on banks, it said the recent 10bps rise in Base Rates by three domestic banks - Public Bank, HL Bank and CIMB - will help to offset the impact.
“More negatively impacted will be AFG, but the impact will be marginally positive for HL Bank.
“This is after considering their loan-deposit compositions which affect repricing, and HLB’s relatively lower LDR.” It said.
REITs and yield proxies like Digi gained on Wednesday in unit/stock prices, reacting to the OPR cut, while selected media, NFO and infrastructure stocks have yet to react and continue to offer alternative on the yield angle, it noted.
Maybank IB Research said the stocks with still over 5% yields in its Buy list were Magnum, BAuto, LitrakK, Heineken, Carlsberg, SP Setia and Malakoff.
“Although we have Hold calls on the media stocks (more than 6% yield), our preference is MCIL, followed by MPR and Star.
“For the relevant sectors, we are still NEUTRAL on consumer and banks, Negative on auto, property and glove,” it said.
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