Consumer: Economic recovery to energize sector OVERWEIGHT

Maintain OVERWEIGHT recommendation on the sector. The demand and supply recovery remains intact as the economy gradually reopens. With economic activities picking up and Covid-19 daily cases remaining low, we noticed optimism in consumers’ future spending as reflected in the Consumer Sentiment Index.

The ongoing efforts to promote booster shots may offset fears of the new Covid- 19 variant threat. The sector is ripe for transformation and growth with the large number of small-to-mid cap companies with expansionary potential, coupled with pivoting opportunities underpinned by changing consumer preferences.

The Malaysian Institute of Economic Research’s (MIER) Consumer Sentiment Index surged to 101.7 points in 3Q21, its highest level since 2Q18, exceeding the optimism threshold as the economy reopens and Covid-19 daily cases remain low. With the gradual pick-up in economic activities, reopening of borders, and ongoing efforts to increase the booster shot rate, we reckon that consumer confidence is likely to remain elevated throughout 1H22.

Our top picks are MR D.I.Y., Guan Chong (GCB) (BUY, FV RM3.48), and Berjaya Food (BFood) (BUY, FV RM2.16). We like MR D.I.Y. for the company’s profitgenerating stores in a post-pandemic scenario, proactive management and the potential of the new “MR DIY Express” store format. Meanwhile, GCB offers a positive outlook as regional demand for chocolate recovers with borders reopening. BFood is attractive due to its revamped and leaner business model. Any weakness in its share price is an opportunity to collect, in our view.

RETAIL RESEARCH

Stocks on Radar: AWC, Lotte Chemical Titan Holding

ECONOMICS & FX HIGHLIGHTS

Yen continues to weaken

MYR to fluctuate in the range of 4.1775 and 4.1936 against US dollar

Source: AmInvest Research - 30 Dec 2021