PETALING JAYA: Home improvement retailer MR DIY Group (M) Bhd
remains CGS International (CGSI) Research’s top pick among consumer discretionary stocks, as shoppers look for cheaper alternatives amid price pressures.
The brokerage has maintained an “overweight” on consumer stocks overall, with an “add” call on MR DIY and a target price (TP) of RM2.11.
It prefers “value” retailers among consumer discretionary stocks as cost pressures continue to drive demand for value and affordability.
It said MR DIY, besides being supported by exposure to downtrading trends, has a compelling share price as it trades at close to half the 2026 price-to-earnings (PE) of direct regional peer Dollarama Inc, valued at 35.6 times 2026 PE.
Among the other consumer discretionary stocks it covers, the brokerage has reiterated a “reduce” call on 7-Eleven Malaysia Holdings Bhd with a TP of RM1.40 following weak earnings and softer near-term visibility, while it has an “add” call on MyNews Holdings Bhd with a TP of 66 sen as valuations remain undemanding, with improving return on equity supporting gradual re-rating potential.
It said government data on May retail trade released on July 10 suggested that consumers remain price-conscious and continue to favour value-oriented retailers for everyday essentials.
The May retail trade data showed sales at non-specialised stores rose by 8.2% year-on-year (y-o-y) and 2.7% month-on-month (m-o-m) while sales in specialised stores increased by 3.4% y-o-y and 2.1% m-o-m to RM8bil.
“Against this backdrop, government support measures, including Sumbangan Asas Rahmah cash handouts, the retention of the RON95 subsidy and the Budi Diesel subsidy, should continue to underpin value-led consumption, in our view, and we see 99 Speedmart Retail Holdings Bhd, MR DIY, Eco-Shop Marketing Bhd, and MyNews as the key beneficiaries,” it said.
Among consumer staples, it has reiterated a “reduce” call on 99 Speedmart with a TP of RM2.94 due to stretched valuations.
It has recommended a “reduce” call on Nestle (M) Bhd with a TP of RM92 and a “hold” on QL Resources Bhd with a TP of RM3.48, while it has “add” calls on Fraser & Neave Holdings Bhd and Farm Fresh Bhd, at TPs of RM37 and RM2.47, respectively.
It expects a subdued second quarter 2026 (2Q26) reporting season for consumer stocks, driven primarily by higher input costs (that is, PET resin) following petrochemical supply disruptions arising from Middle East tensions in late-February, compounded by a lag in passing on these higher costs to consumers.
“Channel checks with the companies under our coverage indicate an increase in diesel costs is not a significant headwind.
“However, we expect a recovery in 3Q26, as input costs would have normalised with oil prices stabilising,” it added.
