The retail industry will continue to deliver good earnings this year driven by strong consumer spending and expansion plans of companies, says OSK Research.
In a note on Tuesday, OSK said the removal of the import duty on 300 items which are targeted at attracting tourists, would also substantially benefit retail companies.
Apart from organic growth which will be supported by strong consumer spending, the continuous expansion into new markets or adoption of different strategies to capture different market segments will also boost earnings, it said.
Generally, it said retail companies also offer slightly higher average dividend yields and more stable earnings growth, versus food companies.
OSK maintain the "overweight" call on the retail industry as it expects stronger consumer spending and aggressive plans of companies to boost earnings.
Given the positive outlook, the research firm is raising the target price of AEON Co (M) Bhd, Bonia Corporation Bhd and Padini Holdings Bhd to RM7.98, RM2.52 and RM1.01 respectively.
The target price of Parkson Holdings Bhd was raised to RM6.67 with a "buy" call, it said.
"Parkson, which has exposure in high growth countries such as China, Vietnam and soon in Cambodia, is our top pick within our retail universe," it added.
While a gradual cut in subsidy would trigger a knee-jerk reaction in consumer spending, OSK said the impact could be short-lived, as consumers adapt to the higher cost of living.
It said retail companies have fared well despite the hike in petrol price and recession in 2009.
"We believe that while consumers would normally be affected psychologically, they would still buy as their buying power remains intact," it said.