Kenanga Research said the backdrop reflected a shift towards essentials and tourism-linked spending rather than a broad-based surge.
PETALING JAYA: The consumer sector is poised to benefit from a convergence of tourism momentum and domestic policy support as spending patterns adjusted ahead of a busier travel calendar.
Near-term demand visibility had improved on the back of higher visitor flows and targeted fiscal measures, even as consumption remained selective and valuation concerns tempered broader optimism.
Kenanga Research said the backdrop reflected a shift towards essentials and tourism-linked spending rather than a broad-based surge.
“The consumer landscape in Malaysia is entering a phase where tourism upswing and domestic policy support are converging,” the research house said, noting that tourism spending remained heavily skewed toward consumption-related activities, with retail and food and beverage collectively accounting for 70% of total tourism activity.
It added that while demand visibility had improved ahead of Visit Malaysia 2026 (VM2026), consumer spending remains selective, with recent consumer price index trends showing limited cost pass-through so far, although it sees a higher risk of pass-through emerging in 2026.
Kenanga Research observed that market reaction had been largely valuation-driven.
“With much of the policy optimism already reflected in valuations, we maintain our ‘neutral’ stance on the sector, favouring a selective approach,” it said, estimating that only about 20% to 25% of cumulative share price gains after Sumbangan Asas Rahmah (Sara) announcements were attributable to earnings upgrades.
Within this context, it favoured Fraser & Neave Holdings Bhd
(F&N) with an “outperform” rating and target price (TP) of RM39.40, and MR DIY Group (M) Bhd with an “outperform” rating and TP of RM1.80.
Tourism was expected to drive on-the-go consumption following the government’s allocation of over RM700mil under Budget 2026, including RM500mil for VM2026.
Food and beverage players such as F&N were seen benefitting from ready-to-drink demand, while bottled water producers Spritzer Bhd and LWS Holdings Bhd were flagged for incremental uplift.
Rated “market perform”, QL Resources Bhd (TP: RM4.26), through its FamilyMart convenience outlets, and ice cream producers such as Farm Fresh Bhd (TP: RM2.70) and Nestlé (M) Bhd (TP: RM99.20) are also highlighted as beneficiaries of higher tourist footfall.
Beyond food and beverage, rising visitor traffic at urban malls in Kuala Lumpur and Penang was expected to support retailers such as Aeon Co (M) Bhd (outperform; TP: RM1.40), Padini Holdings Bhd (outperform; TP: RM2.35) and MR DIY.
The research house said shopping remained the largest component of both inbound and domestic tourism expenditure, while cafe operators in high-traffic locations could also see spillover benefits.
Domestic consumption continued to be underpinned by cash and in-kind assistance under Sumbangan Tunai Rahmah and Sara, which carried a combined RM15bil allocation in Budget 2026.
Kenanga Research described a structural pivot towards in-kind support that channelled spending towards groceries and daily necessities, reinforcing demand for mass-market food and beverages and value-orientated retail formats.
The expanding Sara merchant network, now numbering about 9,200 retailers nationwide, had supported near-term essentials demand, although the research house cautioned that “much of the positive impact is already reflected in valuations among perceived beneficiaries”.
Against this backdrop, Retail Group Malaysia revised its 2025 retail sales growth forecast to 3.6%, while Kenanga Research flagged persistent cost pressures and a higher risk of cost pass-through emerging in 2026 as key issues to watch alongside policy execution and earnings delivery.
