PETALING JAYA: The consumer sector will continue to grow well, Due to strong domestic demand and supply chain enhancements. That will make restocking operations easier. Commodity prices heading downward following price increases made in 2021 to 2022, and there is also margin stabilization.
According to Hong Leong Investment Bank (HLIB) Research, businesses can change course. And offering customers greater ease will be more successful in capturing the ringgit spent.
This is not without difficulties. The outlook is less by declining actual earnings and income due to inflation. The normalization of retaliatory spending, recessionary concerns, and falling consumer mood.
The research firm is still of the opinion that the sector is “neutral.”
Berjaya Food Bhd, for which it has a “buy” call and a target price (TP) of RM1.31 per share, is one of its top picks in the consumer sector. Based on the financial year 2023’s price-to-earnings ratio (PE) (FY23).
It is good news for Starbucks, which keeps expanding through the introduction of new locations. As well as increasing sales from ongoing promotions, and a leaner concept adopted by Kenny Rogers Roasters restaurants. The Berjaya Food group would be able to sustain its profitability.
Based on a 14-times PE, HLIB Research also has a positive view of Focus Point Holdings Bhd (“buy” call, TP: RM1.51 per share).
In the future, management will concentrate on growing the optical and food and beverage (F&B) areas. Which together make up the two pillars of growth.
According to HLIB Research, the new corporate F&B clients are to start coming on-stream in early FY23. Which could boost the group’s earnings significantly.
According to the research firm, consumer sector earnings for the third quarter of 2022 were uneven. With the benefits of reopening being somewhat offset by inflationary pressures and rising interest rates.
The low base effect from inefficient business operations in FY21 was the main factor besides the year-over-year improvement.
According to HLIB Research, increased input prices, such as those for raw materials, and higher minimum wages. And an increase in the power tariff surcharge continues to exert pressure on the industry’s profit margins.
One of the consumer trends HLIB Research noticed was the numerous ways firms attempted. To increase their share of consumer spending by making accommodations for customer convenience.
This can see in Mr. DIY Express’s smaller stores. Its focus is on upper urban and rural communities. As well as Berjaya Food’s outlet expansion (priority of 50% of the total planned new stores).
Incorporating cafe concepts into its convenience stores is 7-Eleven Malaysia Holdings Bhd. QL Resources Bhd’s edition of the Family Mart Mini Smart Kiosk vending machines, Focus Point’s expansion strategy in Komugi street shop. SDS Group Bhd’s expansion through partnerships with major retailers, and Farm Fresh’s entry into direct-to-consumer Jomcha milk tea outlets.