Hong Leong Investment Bank (HLIB) Research’s December 2022 outlook for the Malaysian consumer sector points to continued expenditure by households throughout 2023. The institute attributes the sector’s strength to solid domestic demand, improving supply‑chain conditions and lower commodity prices, which together help stabilise profit margins after two years of price‑driven pressure. Nevertheless, the report cautions that these positives are not guaranteed. Inflation is eroding purchasing power, real wages are on a downward trend and global recession concerns linger, all of which could curb spending if they intensify.
Reflecting this uncertainty, HLIB maintains a “neutral” rating for the sector – a stance that signals caution rather than optimism. According to the analysts, the companies that will thrive are those that swiftly enhance customer convenience.
Faster adaptation and smoother restocking processes are expected to reduce shelf‑emptiness and speed up inventory turnover, delivering steadier revenues and lower waste. Firms that fail to improve these aspects may lose market share to more agile competitors. HLIB highlighted two stocks as its top picks for the year.
Berjaya Food Bhd received a “buy” recommendation with a target price of RM 1.31 per share, based on its FY 2023 price‑to‑earnings multiple. The company operates Starbucks and Kenny Rogers Roasters outlets in Malaysia; Starbucks continues to roll out new stores and promotions, while Kenny Rogers Roasters has adopted a more streamlined format.
HLIB believes these initiatives should support profitability, although it warns that shifting consumer tastes, potential cost increases and a possible rebound in commodity prices could threaten margins. The second recommendation is F&N Holdings Bhd, also rated “buy” with a target price of RM 25.70 per share. F&N’s strong brand presence in beverages and dairy, combined with consistent demand for staple products and a diversified export business, provides a buffer against a slowdown in the domestic market.
Even with these favorable outlooks for individual companies, the overall sector rating remains neutral. HLIB sees enough supportive factors to avoid a downgrade, yet not enough momentum to justify an overweight position.
The sector is expected to grow, albeit at a moderate pace, while risks such as persistent inflation, sluggish wage recovery and a potential global recession could weigh on consumer confidence and export performance. For investors, the message is clear: prioritize firms with robust brands, efficient operations and a focus on convenience to capture modest growth. Selecting the right stocks could mean the difference between gaining from a stable consumer environment and being left behind as households tighten their budgets.
From the consumer perspective, price hikes that surged in 2021 and 2022 are now easing, though prices remain above pre‑inflation levels. Real wages continue to decline, meaning household disposable income is still under pressure.
The sector’s projected resilience hinges on this wage‑price gap not widening significantly. In summary, HLIB’s December report paints a picture of a consumer market in transition: supply chains are improving, margins are finding footing and demand is holding steady, but the underlying risks remain contained rather than eliminated.
