HLIB Research said Budget 2026, to be presented in October, would be one of the key catalysts for the sector.
PETALING JAYA: The positive momentum in the consumer sector will likely carry through into the second half of this year(2H25) given possible margin expansion from lower raw material costs and the stronger ringgit, analysts say.
The sector will also be supported by the labour market’s strength, fiscal transfers and an uptick in retail spending, favourable seasonal demand in 2H25 and ongoing rise in tourism, along with attractive valuations.
Hong Leong Investment Bank Research (HLIB Research) said in a note to clients that Budget 2026, to be presented in October, would be one of the key catalysts for the sector.
“We anticipate further clarity on targeted subsidies and potentially new consumption-focused incentives.
“The government cash transfers have shown an upward trajectory (RM8bil in 2023, RM10bil last year and RM13bil this year), a strong signal of policy continuity in supporting household consumption,” HLIB Research said.
Another catalyst is the year-end festive season, anchored by school holidays, Christmas and New Year celebrations, which typically sees strong retail momentum, driving sales across mall-based retailers, grocers and food and beverage players.
Meanwhile, Malaysia’s tourism sector is also on a strong upward trajectory, with the World Travel and Tourism Council (WTTC) projecting a contribution of RM218.9bil to the economy this year, marking a 12.1% increase from RM195.3bil last year and surpassing pre-pandemic levels.
Tourism Malaysia has set an ambitious target of 45 million international arrivals this year, with expected tourism receipts of RM270bil, said the research house.
“We anticipate heightened marketing and promotional efforts from companies such as Focus Point Holdings Bhd
and Oriental Kopi Holdings Bhd as they compete to capture increased consumer spending,” HLIB Research said.
On the expanded sales and service tax (SST) that came into effect this month, the research house said the 8% service tax on rental and leasing service providers with annual income exceeding RM1mil, may moderately impact retailers with a significant presence in shopping malls.
“However, we believe the impact will be manageable as rent constitutes a modest portion of overall expenses and several companies have already implemented price adjustments following the recent increase in minimum wage, which we believe provides sufficient buffer to absorb the incremental rental tax without materially compressing margins,” HLIB Research said.
In addition, key staples such as rice, vegetables, flour, poultry, and sugar remain exempt from the SST, thereby limiting consumer price pressures and helping to sustain sales volumes.
Valuation-wise, the research house said despite some positive macro and sectoral tailwinds, the consumer sector remained undervalued.
“This valuation disconnect presents an attractive entry point for long-term investors, particularly for quality names with earnings visibility, solid execution and balance sheet resilience,” it added.
HLIB Research maintained an “overweight” call on the consumer sector with its top “buy” picks being 99 Speed Mart Retail Holdings Bhd at a target price of RM2.98, Aeon Co (M) Bhd at RM1.82 and Focus Point at RM1.14 given their earnings, backed by their expansion plans and brand value.
