MIDF Research maintained its “neutral” call on the sector.
PETALING JAYA: The consumer sector is looking more optimistic this year as domestic spending is expected to be boosted by government handouts to increase spending on staple food and a higher number of tourist arrivals.
In a note, MIDF Research maintained its “neutral” call on the sector as there has been evidence of an unwavering demand for food and beverage (F&B) and non-specialised items since last November.
The research house said it remained positive that the solid retail consumption would be backed by a strong preference in dine-ins for both domestic and tourists segments as well as a steady job market along with a low unemployment rate of 3.3%.
“According to the Statistics Department, retail trade for November 2023 rose 4.4% year-on-year to RM61.3bil while F&B and tobacco stores marked its 27th consecutive positive year-on-year growth during the month.
“Non-specialised sales recorded positive yet normalising retail trade growth at 6.5% year-on-year,” MIDF Research said.
On poultry, the research house said it has a solid outlook as the average prices for grade A to C eggs throughout November exceeded the retail price controls set for eggs in various states across Malaysia.
“This increase can be attributed to the persistent shortages of eggs in Malaysia.
“Conversely, chicken prices in most states in the Peninsular Malaysia were predominantly below the previous national price control of RM9.40 per kg in November 2023,” it said.
However, price controls and subsidies for chicken eggs had remained in place.
Additionally, MIDF Research said global corn prices would remain stable due to ample supply.
It noted that the global supply of soybean meal in 2024 is expected to be supported by Argentina and India, maintaining soybean meal prices at their current level.
“With the animal feed costs likely to stay steady and Malaysia’s removal of price controls for chicken, we expect poultry players under our coverage like QL Resources Bhd
and Leong Hup International Bhd to benefit from improved margins,” it said.
The research house noted that another factor expected to impact poultry prices is the upcoming Indonesian presidential election, particularly in the post-Jokowi era.
Meanwhile, the research house said global commodities prices may fluctuate for F&B manufacturers in the near-term, due to anticipated tight supplies persisting into 2024, caused by adverse weather in major producing countries.
“We are also wary of ongoing global supply disruptions, mostly logistical-related issues causing shipment delays and additional freight costs.
“We anticipate that Nestle (M) Bhd, Fraser & Neave Holdings Bhd and Hup Seng Industries Bhd will be impacted, primarily due to the significant contribution of raw material costs to their production expenses,” it said.
