Consumer sentiment sees rebound on pent-up demand

by MUHAMAD AMIR AIMAN AZLAN / pic by TMR FILE

CONSUMER spending and sentiments are on a recovery path as a result of the high vaccination rate and acclimatisation to the public to live with the virus.

RHB Research analysts Soong Wei Siang and Raja Nur Raja Ali stated public mobility has gradually improved following the lifting of the movement restrictions by the government after the number of new Covid-19 cases in Malaysia dropped to below 10,000 on Oct 3, after peaking at the end of August.

“While we expect there to be a near-term weakness due to business disruptions, particularly in the third quarter of 2021 (3Q21), as movement restrictions only began easing in September, we foresee a more palpable recovery in 4Q21.

“This is as 90% of the adult population is expected to be fully vaccinated by then. Interstate travel and the year-end festivities should also spur spending patterns,” they noted in a report yesterday.

The report added footfall has picked up encouragingly in most places in view of the pent-up demand as the country leaves the most drawn-out lockdown since the start of the pandemic last year.

“Although residual fears from a still-high number of cases and a mutating Delta variant have resulted in a milder pick-up in footfall this time around, we saw consumer sentiment still considerably strong, especially for the food and beverage segment.

“Crowds at shopping malls were at 50%-70% of pre-pandemic levels and we note the strong preference for open areas (eg parks and alfresco dining) as opposed to enclosed spaces like cinemas — which surprisingly saw scant foot traffic. While businesses have mostly resumed operations, we also noticed the many shuttered lots, which are indicative of tough times for businesses,” the analysts wrote.

Strict adherence to standard operating procedures by retailers also manages to instil confidence in the consumer as the businesses have taken steps to ensure their premises are as safe as possible. As consumer confidence has started to recover, the RHB analysts have maintained a ‘Neutral’ call on the consumer sectors with its top picks are counters like MyNews Holdings Bhd, Berjaya Food Bhd (BFood), Innature Bhd and Mr DIY Group (M) Bhd.

The analysts stated MyNews (‘Buy’, target price (TP): RM1.22) is a good proxy to capitalise on the recovery given its entrenched network of stores and contributions from its CU Store.

BFood (‘Buy’, TP: RM2.50) should also benefit handsomely from a return in foot traffic, atop an elevated base coming from its alternative sales channels and Innature for its strong fundamentals with earnings growth to be underpinned by its regional expansion in Vietnam and Cambodia, they explained.

“Mr DIY’s (‘Buy’, TP: RM4.41) aggressive growth anchored by its outlet expansion and effective business model of competitively-priced products in accessible locations also served as good outlooks in the consumer sectors,” the RHB report noted.