For customers of Starbucks in Malaysia, the familiar green logo may soon appear in more neighborhoods. The coffee chain’s parent company, Berjaya Food Bhd, is expanding through new store openings, ongoing promotions, and a leaner concept at its Kenny Rogers Roasters restaurants. That growth is part of a broader trend in Malaysia’s consumer sector, which research firm Hong Leong Investment Bank (HLIB) Research expects to remain robust, supported by strong domestic demand and easier restocking through supply chain enhancements.
Across town, a family visiting a Focus Point optical store might also find a new Komugi bakery nearby. Focus Point Holdings Bhd is pursuing growth in both its optical and food-and-beverage (F&B) divisions—what the company calls its two pillars. HLIB Research has a “buy” call on Focus Point, with a target price of RM1.51 per share, based on a 14-times price-to-earnings ratio (PE). The research firm notes that new corporate F&B clients are expected to start coming on-stream in early FY23, which could significantly boost the group’s earnings.
For shoppers at 7-Eleven convenience stores, the experience is also changing. 7-Eleven Malaysia Holdings Bhd is incorporating cafe concepts into its outlets. Meanwhile, QL Resources Bhd has introduced Family Mart Mini Smart Kiosk vending machines, and Farm Fresh is entering the direct-to-consumer market with Jomcha milk tea outlets. SDS Group Bhd is expanding through partnerships with major retailers. These moves reflect a sector that is actively adapting to capture the ringgit spent by Malaysian consumers.
Businesses adjust to changing conditions
According to HLIB Research, the consumer sector’s earnings for the third quarter of 2022 were uneven. The benefits of the economic reopening were partially offset by inflationary pressures and rising interest rates. A low base effect from inefficient business operations in FY21 also contributed to year-over-year comparisons. Despite these headwinds, the research firm maintains a “neutral” rating on the sector overall.
Commodity prices are heading downward after increases made from 2021 to 2022, and margins are stabilizing. This allows businesses to change course, HLIB Research says. Companies that offer customers greater ease will be more successful in capturing spending. However, the outlook is tempered by declining real earnings and income due to inflation, the normalization of retaliatory spending, recessionary concerns, and falling consumer mood.
Berjaya Food Bhd remains one of HLIB Research’s top picks in the consumer sector, with a “buy” call and a target price of RM1.31 per share, based on FY23’s price-to-earnings ratio. The research firm believes the Berjaya Food group can sustain its profitability through its expansion strategy.
What to watch next
Investors and consumers alike will be watching how these companies navigate the balance between growth opportunities and persistent economic pressures. Key factors include whether inflation continues to erode household incomes, how interest rate changes affect consumer borrowing and spending, and whether new store concepts and product offerings can maintain momentum. The performance of Berjaya Food’s new locations, Focus Point’s expansion into F&B, and the rollout of 7-Eleven’s cafe concepts will offer early signals about the sector’s direction in the coming months.
