MIDF Research expects local consumer staples and general merchandise stores to continue seeing strong revenue growth in 2025.
PETALING JAYA: Malaysian consumer stocks in the retail, food and beverage (F&B) and poultry industries are expected to benefit from resilient domestic spending, generally lower commodity prices and a strengthening ringgit.
MIDF Research, which has upgraded the consumer stocks in its base to “positive” from “neutral”, said in a report that the stable macroeconomic environment, steady employment rates, salary hikes for civil servants and gradual improvement in tourism would make domestic consumption sustainable and fuel retail spending.
Its top picks are QL Resources Bhd
with a target price of RM4.83, Fraser & Neave Holdings Bhd with a target price of RM37 and Aeon Co (M) Bhd with a target price of RM1.67.
The research house pointed out that the strengthening ringgit will provide a buffer against elevated commodity prices, particularly benefiting F&B and poultry players who source inputs in US dollar, as the stronger currency helps reduce costs.
On the strength of recent data showing July 2024 retail sales spending rising 6.6% to RM63.5bil and cumulative seven-month spending growing to RM440.8bil compared with RM414.8bil in the same period last year, it expects local consumer staples and general merchandise stores to continue seeing strong revenue growth in 2025.
The additional disposable income from Employees Provident Fund’s Account 3 enabling flexible withdrawals together with the civil service pay rise “could herald a structural shift towards higher consumption levels, particularly benefitting mid-to-high-end F&B outlets and retailers specialising in non-essential goods and services,” it added.
The research house also sees the influx of tourists fuelling retail spending and boosting overall domestic consumption.
“This surge in tourism has translated into higher tourism expenditure, with total receipts surpassing pre-pandemic levels, reaching RM45.4bil in the first-half of 2024 compared to RM41.7bil in the same period in 2019,” it said.
Among F&B stocks, it noted that companies such as Hup Seng Industries Bhd and Nestle (M) Bhd are well-positioned to benefit from the decline in global commodity prices that will gradually reduce raw material costs and improve margins.
“Therefore, while raw material costs may fluctuate, these companies are expected to maintain profitability through strategic pricing and brand resilience,” MIDF Research said.
It said poultry players should see improved margins from lower feed prices that has been on a steady decline since the beginning of 2024 driven by stabilised prices for corn and soybean meal.
“Looking ahead, we are optimistic that global corn and soybean meal prices will remain low in 2025 due to abundant supply from key exporting countries, further benefiting poultry producers by reducing costs and enhancing margins,” it added.
The removal of the price control for chicken since last November has also helped poultry producers with the flexibility to adjust prices according to market dynamics while the increase in the price ceiling for eggs helps offset cost pressures and sustain their profit margins.
