Rising optimism in the market may buoy the consumer sector in the coming quarters, though rising unemployment and overall economic toll from Covid-19 still remain causes for concern, say RHB in an August 28 note. RHB analyst Juliana Cai is maintaining “neutral” on the consumer cyclical and non-cyclical sector, preferring defensive staples with some exposure to recovery play.
“Although we have started to see more optimism in the market as regional economies bottomed out in 2Q2020, the economic toll and rise in unemployment resulting from Covid-19 are likely to persist into 2H2020- 2021. This should pose continued challenges to overall consumption. We expect a full recovery only in 2022,” says Cai.
Thai Beverage is RHB’s top pick for the sector, which also includes Food Empire, Kimly, Sheng Siong, Dairy Farm, Delfi, Japan Foods, Genting Singapore and Jumbo Group. “We believe Thaibev’s spirits segment (approximately 80% of EBIT) has demonstrated fairly resilient sales and earnings in its 3QFY2020 (Sep) results. Given that the bulk of its spirits product range is consumed at home, sales were largely unaffected by during the lockdown and temporary ban of alcohol sales,” notes Cai.