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ASEAN Consumer Sector Summary

Core Content and Main Views

The document provides an in-depth analysis of the ASEAN consumer sector, emphasizing its long-term growth potential and the importance of investing in the VIP markets (Vietnam, Indonesia, and the Philippines). It highlights that the sector is attractive due to underpenetration of modern retail, rising income levels, and structural growth opportunities. Analysts suggest that despite high valuations, these are justified by the strong growth prospects of the region.

The main points include:

• High interest from funds in the ASEAN consumer sector.
• The VIP markets are considered the most promising due to their growth potential and under-investment.
• Modern retail expansion and rising disposable incomes are key drivers of growth.
• Valuations are justified by the growth rates of the companies in the sector.
• Vietnam is seen as under-invested, with potential for increased foreign investment due to government policy changes.

Key Insights

Structural Growth Drivers

• Modern Retail Expansion: The underpenetration of modern retail in the VIP markets, particularly outside core cities, is expected to continue driving growth.
• Rising Income Levels: As income levels increase, there is a growing demand for higher quality products.
• Urbanization: The trend of urbanization is increasing the share of modern trade in ASEAN, which benefits listed consumer companies due to their brand awareness and distribution capabilities.

Investment Recommendations

• Top 8 Picks: The document lists several companies with strong growth potential and investment ratings.
  • Vietnam Dairy (VNM VN): Buy, with a target price increase of 29.9%.
  • Matahari Putra (MPPA IJ): Buy, with a target price increase of 31.4%.
  • Ramayana (RALS IJ): Buy, with a target price increase of 31.4%.
  • Indofood CBP (ICBP IJ): Hold, with a target price increase of 11.1%.
  • Universal Robina (URC PM): Buy, with a target price increase of 14.5%.
  • Robinsons Retail (RRHI PM): Buy, with a target price increase of 19.2%.
  • OSIM (OSIM SP): Buy, with a target price increase of 6.1%.
  • BreadTalk (BREAD SP): Buy, with a target price increase of 41.9%.

Valuation Justification

• Despite concerns over high valuations, the analysts argue that the growth potential of these companies justifies the current premiums.
• Companies with PEG ratios below 1x are highlighted as particularly attractive investments.

Vietnam's Potential

• Vietnam is considered under-invested, with a "golden population structure" and 1.5 million potential new workers annually.
• The government is expected to increase the foreign ownership limit in non-banking businesses from 49% to 60%, making it more attractive for foreign investment.
• Several major companies have increased their investments in Vietnam, indicating its growing importance in the region.

Key Figures and Data

• Figure 1: Shows GDP per capita differences in ASEAN, suggesting potential for convergence.
• Figure 2: Highlights the dominance of traditional trade in most ASEAN markets.
• Figure 3: Projects growth in Vietnam's modern trade from 4% to 4.4%.
• Figure 4: Forecasts growth in Indonesia's modern trade from 16.5% to 19.5%.
• Figure 5: Anticipates growth in the Philippines' modern trade from 27.3% to 27.7%.
• Figure 6-10: Illustrates household debt levels across ASEAN countries, showing that they remain relatively low compared to more developed counterparts.

Key Risks

• Commodity and Forex Fluctuations: Impact on margins for companies reliant on imports.
• Intense Competition: Especially in price-sensitive segments.
• Economic Slowdown: May reduce consumer spending on luxury items.
• Regulatory and Market Risks: Including competition from new entrants and potential changes in government policy.

Summary Table of Top Picks

Research Team

• Regional Head of Institutional Research: Wong Chew Hann, CA
• Regional Head of Retail Research: Ong Seng Yeow
• Institutional Product Manager: Alexander Garthoff
• Chief Economist (Singapore & Malaysia): Suhaimi Ilia
• Economist / Industry Analyst (Indonesia): Juniman, Josua Pardeede
• Head of Research (Hong Kong/China): Howard Wong
• Head of Research (India): Jigar Shah
• Head of Research (Singapore): Ng Wee Siang
• Other Analysts: Gregory Yap, Wilson Lie, etc.

This summary highlights the key investment opportunities, structural growth factors, and risks associated with the ASEAN consumer sector, particularly in the VIP markets.