KUALA LUMPUR (Aug 5): Expensive consumer stocks on Bursa Malaysia may face a selldown as investors shift their capital into new listings on Bursa Malaysia, CGS International cautioned.

While recent and upcoming initial public offerings (IPOs) could expand the investable universe, competition for capital is likely to intensify and place additional pressure on premium-valued consumer stocks, the research house said in a sector note.

“New large-cap consumer IPOs could divert liquidity from incumbents and erode sector valuations,” CGS International warned.

Convenience store chain operator KK Mart Retail Bhd and Big Caring Group Bhd, the largest pharmacy chain in Malaysia, has already filed for IPOs on the Main Market.

If successful, the firms will join the likes of 99 Speed Mart Retail Holdings Bhd (KL:99SMART), Eco-Shop Marketing Bhd (KL:ECOSHOP), and Empire Premium Food Bhd (KL:EMPIRE) that command earnings multiples of 20 to 35 times in the consumer sector.

Malaysia’s consumer sector share fell from about 16% to 12% of total listed market cap, signalling rotation and de-rating risk as IPOs compete for funds, CGS International said.

With more consumer IPOs seeking valuations above 25 times their earnings multiples, “we see further de-rating risk for premium-valued incumbents as capital rotates into new listings,” the research house flagged.

Uploaded by Lam Seng Fatt