PETALING JAYA: Affin Investment Bank Research has maintained its “neutral” call on the consumer sector following the first half round up.
”While the healthy macroeconomic environment supports consumer spending, this is insufficient to boost overall consumption.
“Therefore, we are positive on consumer staples companies, as consumers shift towards budget-friendly and value-for-money items amid stagnant wage growth and ongoing cost-of-living pressures,” the research house said.
It believes that consumer staples companies are well-positioned to offer better earnings visibility in a landscape of reduced consumer affordability, given their inelastic product portfolios.
Its top pick is Farm Fresh Bhd
(FFB) with a “buy” call with a target price of RM1.80 given the improvement in cost structure along with its strong research and development or R&D capabilities to continuously introduce new products supporting top-line growth.
Affin Research said first-half earnings for the sector were overall within expectations with an aggregate net profit of RM960.1mil, up 8.7% year-on-year.
“Except for Nestlé (M) Bhd, positive y-o-y growth was primarily seen in food and beverage (F&B) counters such as FFB, PPB Group Bhd and QL Resources Bhd,” it added.
The research house pointed out that retail players such as DKSH Holdings (M) Bhd and MR DIY Group (M) Bhd, which focus on essential or staples products, reported positive y-o-y growth, while Aeon Co (M) Bhd and Bonia Corp Bhd saw negative earnings growth.
Affin Research expected margin expansion for the F&B segment, while retailers continue to face flat margins.
