The domestic value-oriented consumer discretionary sector is expected to remain resilient as consumers continue to prioritise affordability amid persistent inflationary pressures and geopolitical uncertainties, according to CGS International.
In its latest sector report, CGS International maintained an “Overweight” call on the consumer discretionary sector, highlighting that government support measures and changing consumer behaviour could provide further tailwinds for mass-market retailers.
The research house said consumer downtrading — where shoppers shift towards more affordable products and services — remains a key driver supporting value-led retailers.
It noted that targeted government measures, including the SARA cash assistance programme introduced in February 2026 and the retention of the RON95 fuel subsidy at RM1.99 per litre, have helped support household disposable income.
The continued adoption of work-from-home arrangements among civil servants, which is also being encouraged in the private sector, could further benefit neighbourhood-based retail operators, CGS International added.
Among the key beneficiaries identified are MR D.I.Y. Group (M) Berhad, MyNews Holdings Berhad and 99 Speed Mart Retail Holdings Berhad, which are positioned to capture demand for affordable daily essentials.
Tourism Provides Additional Support
CGS International said Malaysia’s tourism outlook remains constructive despite ongoing geopolitical risks, with regional travel expected to cushion weaker arrivals from certain overseas markets.
ASEAN travellers, particularly visitors from Singapore, are expected to remain the main contributor to inbound tourism, alongside steady arrivals from China and stronger domestic travel activity.
The research house highlighted that domestic tourism grew 7.2% year-on-year in the first quarter of 2026, while domestic tourism expenditure increased 15.8% year-on-year to RM34 billion, driven by higher spending in accommodation and food and beverage segments.
CGS International said this reflects a growing preference for accessible, short-distance travel among consumers.
While weaker arrivals from Gulf countries and Europe could affect the government’s Visit Malaysia 2026 target of 47 million tourist arrivals, the impact is expected to remain manageable given these markets accounted for only about 2.2% of Malaysia’s tourist arrivals in 2025.
MR DIY Favoured on Value Positioning
The research house reiterated its preference for companies serving the mass market, saying these businesses are better positioned to benefit from consumers seeking value amid tighter household budgets.
MR DIY remains CGS International’s top pick due to its exposure to consumer downtrading trends and attractive valuation profile.
However, CGS International maintained a “Reduce” recommendation on 99 Speed Mart due to its stretched valuation, while 7-Eleven Malaysia Holdings Berhad (SEM) was also kept at “Reduce” following recent earnings weakness and softer near-term visibility.
Within the brewery segment, CGS International favoured Heineken Malaysia Berhad over Carlsberg Brewery Malaysia Berhad, citing Heineken Malaysia’s domestic exposure and potential upside from the relocation of its Singapore production facility to Malaysia and Vietnam.
The report also cautioned that the increasing number of newly listed consumer stocks on Bursa Malaysia could weigh on sector valuation premiums.
Catalysts and Risks Ahead
CGS International said potential catalysts for a sector re-rating include stronger-than-expected same-store sales growth, further SARA cash assistance disbursements, and tourism performance exceeding Visit Malaysia 2026 targets.
However, downside risks remain, including logistics and manufacturing disruptions that could cause product shortages and affect sales performance.
Higher-than-expected operating costs, particularly arising from fuel-related disruptions, could also weigh on margins.
Overall, CGS International expects value-focused retailers to remain relatively defensive as Malaysian consumers continue adjusting spending patterns towards affordability and essential goods.
