KUALA LUMPUR: Affin Hwang Capital research said it remains positive on Malaysia's consumer sector as macro and business conditions remain sound while favouring companies thriving within the F&B space.
However, it maintained its neutral call on the sector as sector valuations remain rich as about 30x forward PER.
"As positive prospects for the sector are largely priced in, we maintain our NEUTRAL call on the sector and stay selective on quality names with good growth prospects.
"Our top pick remains QL Resources for its defensive core businesses and sustainable earnings momentum. For yield plays with a stable business outlook, we flag Heineken and Carlsberg," it said.
In Q1, revenue and core net profit in the sector grew 5% year-on-year, mainly driven by large-cap names such as Nestle, PPB and QL as well as brewers Carlsberg and Heineken.
The research house added that the retail industry's sales as reported by RGM also grew 3.8% y-o-y which bettered the 3.1% expectation in 1Q19.
Moving forward, Affin Hwang expects the low inflation environment and supportive macroeconomic fundamentals to continue spurring local consumption.