KUALA LUMPUR: CIMB Securities Research predicts that the consumer sector would perform better in the first half of 2025 (1H25) as a result of the holiday demand.
The research firm anticipates that the early 2025 festivities would push consumers to make bigger upfront purchases, increasing demand in the first quarter of 2025.
"Overall, we believe that consumer spending power, especially for lower-to-middle income households, will be boosted in 2025.
"This is thanks to the upcoming minimum wage hike to RM1,700 from RM1,500 per month effective Feb 2025 and the increase in civil servants' salaries by an average of 13 per cent from Dec 2024 onwards," it said in a note.
Meanwhile, CIMB Securities Research expects more inflationary pressures towards the end of 1H25, with the government highlighting plans to rationalise petrol subsidies by mid-2025.
This could lead to higher prices for consumers, with consumer names likely to increase selling prices to pass on the additional operating costs, it said.
To recap, CIMB Securities noted that among 14 consumer stocks under coverage, four posted third quarter (Q3) 2024 results that beat estimates, one met expectations, and nine missed estimates.
In the firm's view, most of the earnings misses were due to weaker-than-expected sales (owing to weak consumer sentiment) and
spikes in operating costs.
"At the end of the Q3 2024 reporting season, we maintained our recommendations for all stocks under our coverage apart from Mynews Holdings Bhd (upgraded to Buy from Hold owing to an improved operating outlook).
"We keep our Neutral view on the consumer sector, with Farm Fresh Bhd, MR.DIY Group (M) Bhd, and Aeon Co (M) Bhd as our top picks," it added.