SINGAPORE (10 June): ASEAN consumer staple markets have been hard hit by the Covid-19 pandemic so far, with analysts expecting 2Q20 to be a particularly difficult time for investors. Yet, with regional restrictions set to gradually loosen, 2H20 is expected to be a period of recovery for these businesses should the region avoid a second wave of Covid-19
“Due to COVID-19, we have cut our FY20 earnings by 6%. Our key earnings cuts were largely on lower assumptions on sales and margins,” say a team of DBS analysts led by Alfie Yeo and Andy Sim. Despite these cuts in earnings, the sector is set to remain resilient as the essential nature of consumer staples has seen firms less affected by lockdown measures. Earnings growth is expected to remain resilient (albeit muted) at 2% for FY20 and 11% for FY21.
The team expects a gradual recovery that takes place in phases, with through and end demand hopefully pick-up as F&B outlets begin to reopen as operations normalise post-lockdown even though some social distancing measures may remain. Recovery is expected to take place in FY21 as overall consumption demand returns to some semblance of normalcy. Companies most affected by COVID-19 will see the fastest demand recovery.