Malaysia's consumer sector outlook highlights potential benefits from government cash handouts to lower-income households amidst subsidy removals, as CGS International Investment Bank reported today (July 11, Thursday).
CGS took an OVERWEIGHT stance on the consumer discretionary sector while maintaining NEUTRAL rating on the consumer staple sector.

The consumer discretionary sector, particularly MrDIY and MYNews, stands to gain significantly from increased disposable incomes, driven by government cash handouts and salary hikes. CGS underscores these stocks as prime choices amidst expectations of robust revenue and profit growth in the coming years.

CGS maintains an OVERWEIGHT rating on Malaysian consumer discretionary stocks, projecting substantial revenue growth of 8.3% yoy in CY24F, accelerating to 10.1% in CY25F. The anticipated boost in consumer spending is poised to drive core net profits by 11.2% and 23.3% yoy for the same periods, respectively, positioning stocks like MrDIY and MYNews favourably.

Meanwhile, CGS holds a NEUTRAL stance on consumer staples, cautioning on the high valuations of industry giants like Nestle and QL Resources. They advocate for a shift towards undervalued peers such as F&N, foreseeing potential upside in brewers amidst an improving disposable income environment.

Investors are advised to consider reallocating investments within the consumer sector to leverage the anticipated uptick in consumer spending. CGS International Investment Bank's outlook favours stocks poised to benefit from increased disposable incomes, marking a pivotal opportunity in Malaysia's evolving economic landscape.