F&N, PADINI: Beneficiaries of Consumer Sector’s Near-Term Booster

Consumer Sector: A Near-Term Booster

THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*

What Happened Yesterday?

In response to growing concerns over the rising cost of living, Malaysian Prime Minister Datuk Seri Anwar Ibrahim announced a series of targeted fiscal measures to ease the financial burden on households. Key highlights from yesterday’s live session include:

1. Strengthening the Sumbangan Asas Rahmah (SARA) Programme

   • A RM100 one-off cash aid will be distributed to all Malaysians aged 18 and above via MyKad, from 31 August to 31 December 2025. With this announcement, the total allocation for cash aid has increased by RM2.0bn to RM15.0bn, marking the highest in history.
   • Recipients are allowed to utilise the one-off cash aid for essential items at over 4,100 participating stores nationwide, including 99 Speedmart, Mydin, Giant, Eco-Shop, Lotus’s, Econsave, TF Value Mart, and others.

2. Enhanced Rahmah Madani Sales Programme

   • Allocation for the Rahmah Madani Sales has been doubled to RM600mn (up from RM300mn). Each district will host at least one Rahmah sales location, extending coverage to over 600 state constituencies.
   • This expansion aims to improve access to subsidised goods, particularly in underserved and rural areas.

3. Price Cut for RON95

   • The government will reduce the retail price of RON95 petrol to RM1.99/litre (down from RM2.05/litre) for eligible motorists.
   • The finer details of the fuel subsidy framework are expected to be unveiled by the end of September 2025.

4. Postponement of Toll Hikes on Major Highways

   • The scheduled toll rate hikes for 10 key highways will be deferred this year, providing relief to daily commuters.

5. Extra Public Holiday

   • To mark the Malaysia Day celebrations, 15 September 2025 has been declared an additional public holiday.
   • The move is expected to stimulate domestic tourism and leisure spending over the extended weekend, with a potential boost to the HORECA market.

Our View

We retain a positive view on the newly announced cost-of-living relief measures, seeing them as a supportive near-term catalyst for the consumer sector, particularly in the non-discretionary segment. Direct cash aid, along with savings from electricity and transport subsidies, is expected to enhance household liquidity.

In our view, the relief package primarily aims to ease the financial pressure on households stemming from subsidy rationalisation and the expanded Sales and Services Tax (SST), both of which are expected to exert upward pressure on inflation in 2H25. As such, we believe consumer spending will remain focused on essential goods, with limited spillover into discretionary categories.

Recommendation

Large-format retailers such as 99SMART (Not Rated) and ECOSHOP (Not Rated), which participate in the MyKasih programme, stand to benefit from increased transaction volumes and larger basket sizes as eligible consumers redeem their one-off SARA credit. Both companies may also see improved footfall, creating opportunities for cross-selling.

Meanwhile, essential food and beverage (F&B) players such as NESTLÉ (Buy, TP: RM100.80), F&N (Buy, TP: RM34.44), and FFB (Buy, TP: RM2.25) are expected to benefit indirectly from increased volumes at participating outlets and the inelastic demand for staple goods. Stable input costs also support margin resilience heading into 2H25.

All in all, we reaffirm our Overweight stance on the consumer sector, supported by three key factors: (i) resilient domestic consumption, driven by higher cash availability and inelastic demand for daily necessities; (ii) favourable commodity price trends, which should help sustain gross profit margins for major F&B players; and (iii) robust tourism activity.

Our top picks for 2H25 are F&N (Buy, TP: RM34.44) and PADINI (Buy, TP: RM2.50). We favour F&N for its exposure to the tourism recovery, particularly in Thailand, potential upside from upstream dairy expansion, and stable raw material costs. Meanwhile, Padini is well-positioned to capture demand from value-conscious consumers seeking quality products at affordable prices, making it a likely beneficiary of consumer downtrading amid ongoing cost pressures.

Figure 1: Peers Comparison Table

Sector Recommendation Guideline

OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.

NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.

UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.

Stock Recommendation Guideline

BUY : Total return of the stock exceeds 12%.

HOLD : Total return of the stock is within the range of 7% to 12%.

SELL : Total return of the stock is lower than 7%.

Not Rated: The company is not under coverage. The report is for information only.

Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.

Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.

ESG Scoring & Guideline