KUALA LUMPUR: Public Investment Bank Bhd (PublicInvest) remains cautious over Fiamma Holdings Bhd's near-term outlook considering Malaysia's consumer sentiment has turned more pessimistic with higher interest rates eating into spending power.
The consumer sentiment index tracked by the Malaysian Institute of Economic Research (MIER) continued its downtrend and showed greater pessimism in the third quarter of 2023 (Q323) as inflation and higher interest rates ate into spending power.
PublicInvest said Fiamma, being a consumer-based company, is highly dependent on consumer sentiment and resultant spending; hence, the firm remains cautious over its near-term outlook.
Nevertheless, the bank said it remains positive over the company's long-term prospects, underpinned by growing middle class and household income growth, which should lead to stronger consumer spending.
"The company's land bank for property development also provides further earnings and valuation upside once unlocked," it said.
Fiamma Holdings Bhd (Fiamma) reported a higher Q423 net profit of RM10.5 million, mainly due to gains in other investments.
PublicInvest said the results are within the bank's expectations, accounting for 99.4 per cent of its full-year estimates.
"We make no changes to our earnings estimates. We maintain our neutral call on Fiamma with an unchanged target price of RM1.00," it added.