KUALA LUMPUR (June 19): RHB Investment Bank has maintained its “neutral” rating on the consumer sector and said 1Q2024 sector results met expectations, thanks to robust topline growth and improving profit margin.

In a sector update on Wednesday, the research house said the introduction of the Employees Provident Fund’s (EPF) Account 3 and pay rise for civil servants are effective measures to support consumer spending.

“In addition, the pickup in tourist arrivals should benefit the consumer retail players.

“On the flip side, the uncertainty on inflationary impact of subsidy rationalisation will remain a key concern for the sector,” it said.

RHB IB said within its coverage, eight companies reported earnings within expectations, four surprised on the upside and one disappointed ie Padini Holdings Bhd (KL:PADINI) - dragged by aggressive price discounts and rise in staff costs.

The research house said the general feedback from corporates is that consumer sentiment has remained subdued given heightened inflationary pressures.

It said this continued to give rise to downtrading behaviour as price-sensitive consumers constantly sought or hunted for value.

RHB IB said Mr DIY Group Bhd (KL:MRDIY) is a prime beneficiary of EPF’s flexible withdrawal scheme and salary hike for civil servants, given its entrenched network of stores and value-for-money product offerings.

“We highlight Focus Point Holdings Bhd (KL:FOCUSP) for its industry-leading growth underpinned by effective marketing initiatives and rising myopic population.

“DXN Holdings Bhd’s (KL:DXN) valuation is undemanding considering the steady earnings growth whilst dividend yield is attractive at c.6%.

“We also like Mynews Holdings Bhd (KL:MYNEWS) as we believe the robust growth of the Mynews brand and anticipated turnaround of the CU brand could trigger a valuation rerating,” it said.

https://www.theedgemarkets.com/node/715894