Maybank IB: Consumer stocks set for growth in 2017

PETALING JAYA: Local consumer stocks are set for growth this year, underpinned by continued consumer spending and recovery in tourist arrivals.

Despite soft consumer sentiment, Maybank Investment Bank (Maybank IB) Research said real private consumption growth and retail sales have been sustaining its uptrend since the fourth quarter of 2015.

“Our economics research team believes this is due to government’s measures to boost disposable income which continues into 2017, increased allocation for cash handouts, higher minimum wage, cut in workers’ contribution to the Employees Provident Fund, and personal income tax relief.

“Additional tailwind in 2017 is the continued growth in tourist arrivals, as Malaysia plays host to events such as Asean@50 year, 2017 SEA Games and Para Asean Games,” the research house said in a report yesterday.

Maybank IB added that the upcoming gen- eral election spending.

“Separately, while there is no clear spending trend before and inclusive of the quarter in which the general election was held in the past, we note that consumer spending strengthened one to two quarters post general election in non-crisis general election years.”

The research house said most consumer stocks under its coverage had posted decent topline growth numbers over the past three to five quarters, with growth rates ranging from 2% to 11% in the most recent quarter.

“On the domestic front, first quarter 2017 growth was largely driven by volumes and / or new product mix and launches. We note that most have kept price adjustments to am minimum since the second quarter of 2015 mainly due to competition and as consumer sentiment remains subpar.”

Maybank IB said the first could also be a catalyst quarter for 2017 topline growth ranging between 2% and 11% for its basket of consumer stocks, was mainly driven by volume, new product launches and advertising and promotions.

At the earnings before interest and taxes level (ebit), however, some have posted up to double digit declines year-on-year in the first quarter of 2017 on higher operating expenditure and the possibly phasing of advertising and promotions.

“Taking into account 12-month rolling ebit margins, we note that the multi-national companies continued to have been able to deliver expansion in margins as they fine-tuned their focus on cost efficiencies.”

The research house, which has a “neutral” call on the sector, said it is projecting cumulative earnings growth of 5.1% in 2017 for its basket of consumer stocks on the back of 5.3% revenue growth.

“We expect net profit margins to stay flat into 2017 for our basket of stocks.”