KUALA LUMPUR: Kenanga research said the forecast weakness in retailers' performance in 3Q due to an absence of festivities is an opportunity to position for a better 4Q and beyond.
"Retailers usually fare the worst in 3Q19 due to the absence of festivities that typically spur consumer spending.
"We believe that investors could use this opportunity to buy into 3Q weakness while expecting better growth in 4Q19 from year-end and Christmas festive season sales, as well as Visit Malaysia 2020," said Kenanga.
Kenanga maintained its neutral rating on the consumer sector on the expectation that consumer sentiment will remain resilient due to Bank Negara's overnight policy rate cut and sticky demand for consumer staples.
This is despite a step back for discretionary spending due to the weaker ringgit.
The research house also noted that the excise sugar tax should not be overly detrimental to demand due to the low quantum of price increase on the affected products.
Moving into 2020, the research house said the government's allocation of RM1bil through the Tourism Infrastructure Fund for Visit Malaysia 2020 could be utilised by retailers to build around their existing infrastructure to cater for tourism activities and increase footfall into their stores/malls.
Meanwhile, government measures to lessen the financial burden of the B40 group such as the BSH, minimum wages and targeted fuel subsidies are expected to continue supporting consumer spending on basic necessity items.
For its top pick in 3Q, Kenanga has an outperform call on MyNews with a target price of RM1.55 due to new store openings and the introduction of ready-to-eat food and the new Maru Cafe offerings.
In the F&B space, Kenanga highlighted Power Root with an outperform call and target price of RM1.75 for its anticipated strong growth numbers.
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