24-04-2025
Retail Consumption To Remain Robust: MIDF
MIDF Amanah Investment Bank Bhd (MIDF Research) has maintained its positive outlook on the consumer sector despite challenges, citing strong retail spending and a recovering tourism sector.
The research house has reaffirmed its positive stance with a BUY recommendation for Fraser & Neave Holdings Berhad (F&N), Aeon, and Life Water, with respective target prices of RM32.68, RM1.77, and RM1.04. MIDF Research highlighted that the consumer sector remains resilient amid a moderated GDP outlook, with strong retail growth and stabilising margins in the food and beverage sector.
Retail spending in Malaysia has sustained strong growth, with February 2025 retail trade expanding by 5.9% year-on-year to RM65.15 billion, bringing cumulative sales for the first two months of the year to RM131.27 billion. This marked a 7% increase compared to the same period in 2024.
This growth was largely driven by buoyant demand in food and beverage, alongside robust sales in non-specialised stores such as hypermarkets and convenience outlets. Despite a modest dip in monthly sales following January's festive surge, the broader retail landscape remains strong.
The stable labour market is also contributing to consumer resilience, with Malaysia's unemployment rate holding steady at 3.1%. Employment growth of 2.9% year-on-year continues to outpace the expansion of the labour force for the 43rd consecutive month.
On the inflation front, the headline Consumer Price Index (CPI) moderated to 1.5% year-on-year in February 2025, signalling that inflationary pressures have remained well-contained, which supports the purchasing power of consumers.
Looking ahead, MIDF Research expects retail consumption to remain robust, driven by structural factors such as civil servant pay hikes, higher minimum wages, cash assistance, and the recovery of the tourism sector. These elements are expected to bolster household spending, thus supporting sustained retail growth.
In the food and beverage sector, while commodity trends are mixed, with cost pressures from cocoa and coffee, relief has been seen in sugar and packaging costs. Poultry feed costs have stabilised, which should support margins for companies in this segment. The strengthening of the ringgit, while positive, is likely to moderate as tariff risks persist, particularly with the potential indirect impact from US tariffs.
Despite these challenges, MIDF Research has reiterated its positive stance on the consumer sector, maintaining 'BUY' calls on its top picks, F&N, Aeon, and Life Water, based on their solid positioning to benefit from the favourable consumer environment. Related
