KUALA LUMPUR (Jan 10): Hong Leong Investment Bank Research (HLIB Research) has maintained its 'Neutral' outlook on the consumer sector for 2018, driven by the expected rejuvenation of consumer sentiment and appreciation of the ringgit. 

Its analyst Gan Huan Wen wrote in a note today that consumer sentiment has rebounded slightly in 2017 and consumer spending will be further stimulated by measures announced in the last Budget 2018 such as BR1M distribution, tax cuts and other cash handouts by the government. 

However, Gan noted the consumer sentiment index (CSI) has stayed below the threshold level due to a weaker ringgit. According to Nielsen, an alarming rate of 83% of Malaysians still believe the nation is in a recessionary state, Gan said.  

"Despite consumer sentiment dipping to 77.1 in 3QFY17 from 80.1 in 2QFY17, we are encouraged that consumer sentiment has improved from end-2016," he said.  

Companies likely to benefit from the improved consumer sentiment are staple products producers such as Nestle Malaysia Bhd, QL Resources Bhd, Fraser & Neave Holdings Bhd and Dutch Lady Milk Industries Bhd, Gan added. 

HLIB Research expects the ringgit to hover around RM4.00 to RM4.20 against the USD in 2018, compared with the average of RM4.30 in 2017. 

"We expect Berjaya Food Bhd’s Starbucks Malaysia operations to benefit from the stronger ringgit in 2018, as 40% of the Starbucks’s cost of goods sold are denominated in USD," Gan said. 

Additionally, HLIB Research is positive on the brewers sub sector due to healthy dividend yields, the unlikelihood of an alcohol excise hike in 2018 and the occurrence of the World Cup which would boost beer consumption. 

"Of the two brewers, we prefer Carlsberg due to its higher dividend yield and turnaround in its associate company Lion Brewery (Sri Lanka), post flooding in 2016," Gan added.