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Malaysia: Large-cap staples to lead consumer sector growth in 2020
KUALA LUMPUR: Staple producers are broadly expected to outperform retailers in the coming year as consumer spending is kept afloat, especially among the lower-income group.
Affin Hwang Capital research said it forecast sector 2020 core earnings per share growth of 4% year-on-year, mainly driven by large-cap staples.
“Post-revision, we project overall sector EPS to recover by 4.4% yoy for 2020, subsequent to the 6.5% yoy contraction in 2019.
“We expect 2020 growth to be led mainly by large-cap staples such as Nestle and QL in addition to MSM turning around to a core profit in 2020,” it said.
According to the research house, 2020 is set to be a challenging year owing to the Covid-19 outbreak which will likely stretch beyond 1Q20 as well as the recent change in government, which raises potential policy risks over the near term.
However, it does not expect any drastic changes to the cash assistance and incentives under Budget 2020 as well as the recent RM20bil financial stimulus package.
“Overall, we believe the consumer sector forward PER of 29x (+1SD above 5-year mean) remains rich but sustainable given its resilient earnings delivery and decent dividend yields,” it said.
Affin Hwang remains neutral on the consumer sector with QL Resources as its top pick with a target price of RM9.30. Its other buy calls in the sector are Ajinomoto, Heineken and Perak Transit.
Source: https://www.thestar.com.my/business/business-news/2020/03/06/large-cap-staples-to-lead-consumer-sector-growth-in-2020