BIMB Securities Research said higher wages are likely to prompt consumers to consider opting for premium products within the same range.
PETALING JAYA: The food and beverage (F&B) segment of the consumer sector is expected to benefit from an anticipated increase in disposable income, with consumers diversifying their purchases.
Higher wages are likely to prompt consumers to consider opting for premium products within the same range, according to BIMB Securities Research.
The research house said that commodity prices for ingredients for powdered cocoa, coffee and milk are currently on an uptrend, while other commodity prices have stabilised from their all-time highs caused by the Ukraine-Russia war.
“Companies under our coverage that could be affected are Nestle (M) Bhd
, Farm Fresh Bhd and Dutch Lady Milk Industries Bhd.
“However, our in-house economics team forecasts a strengthening ringgit (at RM4.25 against US dollar by end-2025) is expected to benefit MSM Malaysia Holdings Bhd, Farm Fresh Bhd, MR DIY Group Bhd, Padini Holdings Bhd and QL Resources Bhd.
“Finally, the increase in the sugar tax on sugary drinks, from 50 sen to 90 sen per litre is deemed to have minimal impact, as most companies operating in the segment are operating well below the threshold,” the research house said.
It added a boost in consumer spending is anticipated from the wage hike for civil servants, higher minimum wage, continued and higher allocation of cash assistance through government initiatives such as Sumbangan Tunai Rahmah, the ability to withdraw from the Employees Provident Fund (EPF) Account 3 and robust tourism activitiy.
“Nonetheless, we are cautious about the downside risk caused by the implementation risk from the subsidy rationalisation on RON95 fuel compounded by the negative impact on operating costs for companies due to the increase in the country’s minimum wage, as well as possibility of employers having to make EPF contributions for foreign workers,” the research house said.
However, the research house added that it expected inflation to remain stable of 2.7% despite the floating of prices for RON95 petrol as only the high-come T15 group are expected to pay the floating price.
BIMB Securities Research said it is maintaining its “overweight” rating on the consumer sector, with its top picks for the sector being dairy products company Farm Fresh Bhd, hardware retailerMR DIY Group, and supermarket operator Aeon Co (M) Bhd.
