Commodity prices are expected to remain soft with the World Bank Commodity Price Index projected to fall by another 4% this year following a 24% drop last year. Supply conditions for agri and food commodities have improved though some risks remain.<\/p>\n\n\n\n
Alongside a slowdown in inflation plus a recovery in household spending, operating leverage should kick in quite nicely. We forecast sector profit to grow by 16% this year. And current sector valuation of 17.2x 2024 P\/E backed by 13.3% ROE present opportunities for the sector.<\/p>\n\n\n\n
Thus, focus on consumer names with higher operating leverage to play the margin expansion theme, including JFC, MONDE, CNPF and URC.<\/p>\n\n\n\n
Our View:<\/strong> Our high-conviction picks from the sector are JFC and URC. But we are also constructive towards MONDE as we feel that the top up and dividend angles are not yet fully priced in. <\/p>\n\n\n\n The sector is starting to outperform the broader market with URC still lagging behind (possibly due to concerns of relatively elevated input costs such as robusta coffee) and JFC also trailing its peers (but the counter did outperform last year). <\/p>\n\n\n\n In terms of foreign interest, URC stands out as the most net foreign sold stock as of end-January. In contrast, JFC continues to be among the most favored counters to foreign investors.<\/p>\n\n\n\n