KUALA LUMPUR – Kenanga Research has reiterated a ‘neutral’ rating on the consumer sector due to the lack of near-term re-rating catalysts.
In a note, it said basic consumption should persist to be buoyed by government stimulus packages, a low-interest rate environment and a consumer-friendly Budget 2021.
“That said, the cautious consumer sentiment remains moving past the new year, no thanks to the lingering impact of the Covid-19 outbreak.”
It noted that even though the recovery in consumer sentiment in the near-term may be stalled by concerns on a resurgence of Covid-19 cases locally and the lingering impacts of prevention measures, basic consumption should still continue with additional financial relief.
“A major deciding factor to recovery lies in a successful and effective vaccination programme, which is seen to be materialising as the year progresses.”
Kenanga Research said its top pick would be Power Root (PWROOT), with an offer price of RM2.25, as the stock is a resilient dividend play, backed by relatively inelastic coffee demand, attractive dividend yield and controlled margins from continuous business transformation.
“Food and beverage counters, especially those with higher exposure to in-home consumption, including QL, Nestle and PWROOT, should remain fairly resilient and will still fare better than others in the event of a prolonged fight against the pandemic.”
Notably, it added that the majority of companies are ramping up their online presence, mostly through e-commerce platforms, aiming to capture additional market share from consumers favouring online shopping over brick-and-mortar stores in an attempt to adapt to changing consumer patterns. – Bernama, January 6, 2021
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