These 4 Singapore companies could benefit from consumption growth in Asia

One derives 60% of sales from North Asia, wherein retail sales are robust.

In an RHB Research report, analyst Juliana Cai identified four Singapore-listed companies that could benefit from consumption growth in key Asian markets besides Singapore.

Dairy Farm International, which derives 60% of its sales from North Asia, could be a key beneficiary as its healthy & beauty segment could get a boost from improved medicine & cosmetics sales in Hong Kong and China.

Cai noted that China’s retail sales remain robust, chalking up 9.7% YoY growth during the first four months. “Growth from retail sales of meals, cosmetics and commodities were higher than the overall average,” she said.

Retail sales in Hong Kong were even stronger (January-April: +13.9% YoY), backed by upbeat consumer sentiment and increased tourism. “Sales of jewellery & watches, electronics and medicines & cosmetics skewed the high growth. We think this could be partly attributed to higher mainland Chinese tourist arrivals,” she added.

Meanwhile in Thailand, recent GDP data shows that growth is at its fastest in five years. “Although private consumption has yet to see broad-based expansion, we note that the contraction in farm income has begun to slow,” Cai said.

A recovery in agricultural prices would be positive in raising overall purchasing power and would benefit a Thailand-concentrated company like ThaiBev, the analyst added.

In Indonesia, consumer confidence has shown monthly consecutive improvement in May. This should benefit Delfi and Japfa, which have large exposure to the Indonesian market.

“Currently, we are expecting inflation to subside post-Lebaran, which should help boost demand,” Cai said. “However, continuous IDR depreciation is a key risk, as consumers’ purchasing power would be negatively affected by cost pressures.”

Consumer companies with exposure in Malaysia could also expect a rosier outlook. “The recent zero-rated GST is likely to improve sentiment and boost consumer spending over the next 12 months,” the analyst concluded.