Skip to main content

Consumer sector to thrive



PETALING JAYA: The consumer sector is seen as a defensive play, given the resilient demand for staple-related products, solid domestic consumption backed by stable labour market, robust retail trade and increased tourism activities, says MIDF Research.

The research firm, which is positive on the sector's outlook, said food and beverage (F&B) producers are in for better profit margins, driven by declining global commodities prices and previous price hikes, offsetting other cost pressures.

Additionally, the normalising soybean meal and corn futures prices suggest lower raw material costs for poultry players, further supporting their profit margins, it said in its latest sector report.

Hence, MIDF Research's top picks continue to be consumer staple-related companies that exhibit resilient demand such as QL Resources Bhd, with a target price (TP) of RM6.75 a share, and Fraser & Neave Holdings Bhd or F&N (TP: RM33.50).

"We favour QL Resources, which is supported by consistent demand for marine and livestocks products.

"We also like F&N because the company is likely to benefit from the rising demand for ready-to-drink beverages, which is being fuelled by an increase in tourist traffic," it added.

Currently, QL Resources and F&N have attractive valuations.

MIDF Research said QL Resources has a price-to-earnings ratio (PER) of 28.3 times for 2024 while F&N's PER is 16.7 times for the same year.

"These stocks might be undervalued, making them compelling investments in the consumer staple sector, considering their strong fundamentals," it said.

Looking ahead, the research firm said: "Our economists anticipate a stronger ringgit, with an average exchange rate of US$1:RM4.43 for 2023, projected to reach US$1:RM4.24 by the end of the year."

Consequently, a stronger ringgit is expected to benefit consumer staple companies, including both F&B and poultry players, as it has the potential to lower their raw material costs.

MIDF Research, however, said export-oriented companies such as Asia File Corp Bhd and Rhong Khen International Bhd may experience lower sales due to the stronger ringgit against the US dollar, as a significant portion of their revenue is received in greenback.

Meanwhile, the expectations of lower animal feed costs, along with government subsidies, are expected to support profit margins against the ongoing price ceilings for chicken and eggs.

"As such, this will benefit poultry companies like QL Resources (TP: RM6.75) and Leong Hup International Bhd (TP: 50 sen).

"Furthermore, given the expectation of falling animal feed costs, this could encourage poultry players to increase the supply of Grade A eggs and, hence, lower the average price for Grade A eggs in the near term," said MIDF Research.

The research firm expected continued growth in the retail sector throughout this year.

"This is expected to encompass non-specialised stores, as well as the F&B and tobacco segments in specialised stores, underpinned by sustained demand for essential items, the resurgence of out-of-home consumption following the economy reopening and an uptick in tourist arrivals," it added.

As such, MIDF Research anticipated non-specialised retailers such as Aeon Co (M) Bhd (TP: RM1.40) and Family Mart within QL Resources, will reap the benefits of this uptrend.

Additionally, considering its competitively priced products, Padini Holdings Bhd (TP: RM4.60) is well-positioned to capitalise on the favourable retail trade environment, it noted.

Looking ahead, MIDF Research foresees decreasing raw material costs for food manufacturers due to the lowering of futures prices for key commodities such as wheat and crude palm oil.

In August 2023, despite fluctuations in the average three-month future prices of global commodities, the commodities futures remained significantly below their two-year peak levels.

"This suggests the potential for lower raw material costs in the near term, aligning with the ongoing global trend of declining commodity prices," it noted.

Comments

Post a Comment

Popular posts from this blog

Osho Quotes on Meditation

Osho Quotes on Meditation If tea-drinking can become a meditation, then anything can become a meditation — cooking or washing your clothes, any activity can be transformed into meditation. And the real sannyasin, the real seeker, will transform all his acts into meditation. Only then, when meditation spreads over all your life, not only when you are awake in the day — slowly slowly it starts penetrating and permeating your being in sleep too — when it becomes just part of you, like breathing, like your heartbeat, then, only, have you attained to the discipline, to the essential discipline of Zen. Meditation means: drop all thoughts, drop all ideologies, drop all knowledge. Drop the mind itself. The mind is constantly talking. If the inner talk can drop even for a single moment you will be able to have a glimpse of no-mind. That’s what meditation is all about. The state of no-mind is the right state. It is your state. Millions of people miss meditation because meditation has taken on...
2 comments
Read more

Im a mum I save time doing my kids lunches using savvy hacks its easy

EVERYONE parent will know just how crazy the mornings can be when you're getting the kids ready for school. From prepping their lunches, to getting them washed and ready - time can fly by. But one savvy mum has shared just the hack to help speed up the process in the mornings. The mum, who goes by the name of Azure MacCannell on TikTok, has revealed a super time saving trick. She preps all of the sandwiches for the week, and freezes them. Azure has two lines of separate pieces of bread next to each other, On one line she spreads peanut butter, and on the other line she spreads jam. Azure then places the bread on top of each other to make a sandwich, before using a crust cutter to make the sandwiches into smaller squares. She then puts them into a big container and freezes them and use them "as needed." Azure also freezes the crust for "delicious French toast sticks." The video attracted thousands of likes, with many rushing to the comments section to share their...
Post a Comment
Read more

Osho on Witnessing technique

Osho on Witnessing technique – You can witness breathing, you can witness the thought process in OSHO INSIGHTS ON MEDITATION Osho – Societies will come and go. You will take birth and you will die and many lives will come and go, and many, many clouds will pass through you. But the inner sky – AKSHAT – remains uncorrupted, virgin. But you can become identified with clouds. You can begin to feel that ”I am the clouds”. Everyone is identified with his own thoughts which are nothing more than clouds. You say, ”my thought,” and if someone attacks your thought, you never feel that your thought is being attacked – you are being attacked. The sky is fighting – fighting for clouds because some cloud has been attacked. The sky feels, ”I am attacked!” The sky was there when there was no cloud, the sky will be there when there is no cloud. Clouds add nothing to the sky. And when clouds are no more, nothing is lost. The sky remains itself totally. This is the nature – the inner sky, the inn...
Post a Comment
Read more