PETALING JAYA: The consumer sector outlook remains broadly resilient, but valuations are not attractive enough to drive further upside, according to UOB Kay Hian (UOBKH) Research, which has maintained a “market weight” stance.
The research house said in a note update yesterday that macro and geopolitical developments are shaping a mixed operating environment: “The conflict has had limited direct operational impact...but second-order effects differ by business model.”
It added that companies face varying degrees of exposure through logistics costs, commodity prices and foreign exchange fluctuations.
Consumer sentiment, while previously firm, has turned more uncertain in recent months.
“Retail spending is highly sensitive to sentiment shocks, even if the direct household impact is limited,” said UOBKH Research, citing Aeon Co
(M) Bhd as an example, where past subsidy-rationalisation announcements led to temporary pullbacks in spending despite minimal real income disruption.
Meanwhile, the research house said government support measures have provided only modest relief, exemplified by MySara (Sumbangan Asas Rahmah)-linked sales, which have been softer compared with the previous 2025 cycle.
Broader product eligibility and a wider pool of participating retailers diluted spending concentration, reducing urgency among consumers.
UOBKH Research reported that cost pressures remain uneven across the sector, particularly for manufacturers exposed to input volatility.
Companies such as Spritzer Bhd are navigating fluctuations in resin prices, while others rely on pricing power, cost controls and inventory buffers to protect margins.
Despite lingering uncertainties, valuations have remained relatively firm.
The consumer sector has modestly outperformed the broader market since the onset of geopolitical tensions, although the research house remains cautious.
“Persistent external uncertainties and the likelihood of lagging a recovering broader market are expected to limit rerating potential,” it said.
With the sector carrying 23.4 times forward earnings, the research house said valuations are not compelling relative to historical levels, particularly amid a structural derating of defensive consumer names.
That said, UOBKH Research continues to favour Fraser & Neave Holdings Bhd, Heineken Malaysia Bhd and Oriental Kopi Holdings Bhd, citing steep discounts to their historical valuations and identifiable catalysts that could help unlock value in the near term.
