Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on January 7, 2020

KUALA LUMPUR: As the general outlook for the consumer sector remains soft, economists believe the bright spot for the sector will be the government’s Visit Malaysia 2020 (VM2020) campaign, which is expected to boost spending on the back of an increase in tourist arrivals.

For the first nine months of 2019, Malaysia’s international tourist arrivals and tourist receipts increased by 3.7% and 6.9% year-on-year to 20.1 million and RM66.1 billion respectively.

With VM2020, the government is targeting 30 million international tourist arrivals in 2020 with total tourist receipts of about RM100 billion.

“To ensure the success of VM2020 and strengthen the tourism industry in Malaysia, the government has allocated RM1 billion in the Tourism Infrastructure Fund until end-2020 to provide financial assistance to existing and new companies involved in tourism-related activities and services,” AllianceDBS Research said in a note recently.

“The fund is eligible for all tourism infrastructure projects in Malaysia. These are projects that contribute to the development of the tourism industry such as, but not limited to hotel, convention centres, facilities related to education, medical or agro-tourism,” the research house said.

Areca Capital Sdn Bhd chief executive officer Danny Wong Teck Meng said with VM2020, certain listed companies may indirectly benefit from increased tourist arrivals, such as Genting Malaysia Bhd, which owns and operates Resorts World Genting.

He also likes Berjaya Food Bhd, which operates the Starbucks chain of specialty coffee outlets via franchise, as he sees the growing coffee chain remaining as a key earnings driver.

Meanwhile, AllianceDBS also believes that the current crude palm oil (CPO) price rally will improve purchasing power, particularly in the palm oil sector.

CPO prices have recovered since the second half of 2019. Since hitting a low of RM1,865 per tonne in June 2019, the settlement price has been trending up to reach RM3,128 on Dec 30, 2019.

“The sustained price recovery of CPO could boost purchasing power of the workforce and growers in palm oil-related sectors, which in turn may induce higher consumer spending in rural areas,” said AllianceDBS.

Looking ahead, the research house believes that Dutch Lady Milk Industries Bhd, Fraser & Neave Holdings Bhd and Nestle (Malaysia) Bhd could benefit from increased consumer spending arising from Budget 2020’s initiatives and the recovery in CPO prices.

“Meanwhile, Mynews Holdings Bhd, 7-Eleven Malaysia Holdings Bhd, AEON Co (M) Bhd and Berjaya Food Bhd are [also] well positioned to capitalise on higher tourist spending from VM2020,” it added.

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