PETALING JAYA: The consumer sector is poised for growth in financial year 2025 (FY25) underpinned by an anticipated boost in domestic consumer spending and robust tourism activity.
Bank Islam Malaysia Bhd (BIMB) Securities Research said the food and beverage (F&B) and retail segments are expected to benefit from higher purchasing power as well as their positioning as preferred value-for-money retailers.
The research house stated that 15 consumer companies under its coverage had shown mixed results in the fourth quarter of 2024 (4Q24).
Six companies have exceeded expectations, namely QL Resources Bhd
, Spritzer Bhd, Kawan Food Bhd, Padini Holdings Bhd, Hup Seng Industries Bhd and Rhong Khen International Bhd, while three came in below expectations: Nestle (M) Bhd, MR DIY Group (M) Bhd and Amway (M) Holdings Bhd.
Meanwhile, Farm Fresh Bhd, MSM Malaysia Holdings Bhd, Dutch Lady Milk Industries Bhd, Aeon Co (M) Bhd, Petronas Dagangan Bhd and Lee Swee Kiat Group Bhd came in line with the research house’s projections.
BIMB Research said MSM stood out as a “star performer” as net profit jumped by 67.2% year-on-year (y-o-y) to RM71.7mil in 4Q24 ended Dec 31, 2024.
Overall, the consumer sector’s earnings for 4Q24 across the 15 stocks saw an increase of 4.9% y-o-y, supported by higher sales volumes, fuelled by strong domestic consumption in line with higher retail trade numbers.
The research house foresees a boost in domestic consumer spending after factoring in higher disposable income from minimum wage and civil servant wage hikes, higher allocation of the Sumbangan Tunai Rahmah and the Employees Provident Fund Account 3 withdrawal.
As for anticipated robust tourism activity, BIMB Research said it will be underpinned by higher expected tourist arrivals of 31.4 million in 2025.
“This will be bolstered by 10 new international flights and Malaysia being the Asean chairman will boost overall consumer spending,” it added.
The F&B segment is expected to be a key beneficiary of the anticipated higher consumer spending, considering consumers diversifying their purchases and opting for premium products within the same range.
Despite rising input costs for cocoa, coffee, and volatile milk powder prices, BIMB Research said these could be partially offset by stabilised prices of other commodities and ongoing cost-efficiency strategies by companies.
“We remain optimistic on the F&B sector, given its nature of necessity good, where demand remain intact despite the challenging environment,” it said.
Stocks such as AEON, MR DIY and Padini were among the research house’s picks with a “buy” call for being a value-for-money retailer.
Amway was given a “sell” rating due to a perceived lack of motivation among Amway Business Owners from muted incentive provisions.
BIMB Research maintained an “overweight” rating on the consumer sector, with its top picks being Farm Fresh, MR DIY and AEON.
“Nevertheless, we remain cautious about the implementation risks associated with the upcoming subsidy rationalisation on RON95, which could strain consumer spending and weaken consumer sentiment.
“Overall, we expect earnings for the consumer sector under our coverage to grow by 8% y-o-y in FY25,” it added.
