Published: Wednesday September 25, 2013 MYT 1:49:00 PM
Updated: Wednesday September 25, 2013 MYT 1:51:51 PM
KUALA LUMPUR: RHB Research is Neutral on the consumer sector and suggests investors buy on share price weakness, especially stocks that offer good dividends.
It said on Wednesday its top picks are QL Resources (Buy, Fair Value: RM4.20) and NTPM (NTPM, Buy, FV: 69 sen).
“We are downgrading Aeon to Neutral from Buy given the limited share price upside. The share price has appreciated by some 10.4% after we upgraded the stock to a Buy at end-August,” it said.
To recap, RHB Research said it met with 50 investors at its joint consumer sector marketing sessions in Singapore and Malaysia this month.
“Investors were generally more interested in our mid- to small-cap ideas in Malaysia, as the large-cap stocks are trading at the higher end of their valuations,” it said.
RHB Research said Indonesia and the Philippines, which are still in early growth stages, have the most attractive consumer sectors in the Asean region.
While the more mature consumer sectors in other countries are seeing slower growth, Malaysia's long-term consumption growth is still intact due to its young population profile (48% below the age 25 versus Indonesia's 45% and Thailand's 36%).
However, the research house expects medium-term headwinds will come in the form of the goods and services tax (GST), which could be announced in the upcoming 2014 Budget proposals and be implemented in 2015.
It pointed out consumer sentiment may be dampened during the early stages of the GST implementation, primarily due to a lack of awareness and expectations of higher inflation, although we expect consumer spending to normalise after the gestation period.
“Generally, clients like our ideas on QL Resources for its high growth stemming from its regional expansion and the recovery of poultry margins. We are positive that the group is on track to deliver stronger earnings in the coming quarters.
“Another Top Pick, NTPM Holdings, appears to be receiving more attention since our last marketing sessions in June,” it said.
RHB Research said investors were pleased to know that NTPM’s new plant in Vietnam is slated to be ready mid-CY14, and it plans to penetrate into the Thai market in the near term.
“Singapore-based clients also expressed more interest in the multi-level marketing (MLM) players, for example Amway, Hai-O and Zhulian,” it added.
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