British American Tobacco

Re: British American Tobacco

Postby winston » Tue Feb 11, 2020 8:44 am

vested

Perhaps it’s time for a relook

With the decline of BAT’s share price, its attractive valuation now warrants a relook.

BAT’s past 5-year average PE is 18.9x compared to current forward PE of just 10.6x based on FY20 earnings.

At current price levels, BAT yields an attractive 9.0% based on a 95% pay-out ratio of FY20 earnings.

We lower our FY19/20/21 forecasts by 6.0%/6.8%/3.9% to factor in down-trading from premium brand to VFM brand.

This lowers our DCF based TP from RM15.28 to RM14.66.

Still, given the decline in share price (-68% in the past 1-year and -23% since our last report in Nov), we think the stock is worth a shot and upgrade from Hold to BUY.

Source: HLIB
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Re: British American Tobacco

Postby winston » Fri Feb 21, 2020 8:45 am

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BAT revenue and profit decline for fourth straight year in FY19

KUALA LUMPUR: BRITISH AMERICAN TOBACCO (M) BHD (BAT) reported its fourth straight years of declining revenue and profits, as rampant illegal cigarette trade continued to gain market share at the expense of legal players.

Full year ended Dec 31, 2019 (FY19) net profit slumped 27% to RM343.8mil, or RM1.21 a share compared with RM470.7mil, or RM1.64 see a share made a year earlier.

Revenue fell 11% to RM2.5bil, the company said in a filing with Bursa Malaysia today.

The weak results, BAT said were mainly attributed to lower cigarette sales volume as a result of significant legal market contraction, smokers switch to cheaper brands, as well as the absence of one-off factors reported in the previous year.

"The group’s growth strategy will be very much dependent on the recovery of the legal cigarette market, a regulated nicotine landscape, sensible fiscal policies and resolution of the affordability issues affecting consumers," it said.

The company has declared a fourth interim dividend of 33 sen a share to lift its full year payout to RM1.18 sen a share.

Meanwhile, in separate filings with Bursa Malaysia, BAT has announced that managing director Hendrik Stoel has opted for an early retirement.

The company has appointed Jonathan Darlow Reed as new managing director.

Source: The Star

https://www.thestar.com.my/business/bus ... ar-in-fy19
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Re: British American Tobacco

Postby winston » Fri Feb 21, 2020 8:57 am

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MD of BAT retires

By GANESHWARAN KANA

PETALING JAYA: The managing director of Malaysia’s largest tobacco company has retired just as the firm reported its worst net profit since its merger two decades ago.

BRITISH AMERICAN TOBACCO (M) BHD (BAT), which witnessed declining profitability for the fourth consecutive year, announced yesterday that its managing director Erik Stoel has opted for early retirement.

The 51-year old Stoel, who is a Dutch, has helmed BAT since June 2016. He will leave office on March 31 following a one-month transition period prior to handing over to his successor, Jonathan Reed.

For the fourth quarter of financial year 2019 (4Q19), BAT reported a net profit decline of 18.27% year-on-year (y-o-y) to RM93.86mil. The company’s revenue in the October to December 2019 period also fell by 14.03% y-o-y to RM662.45mil.

The board of directors announced a dividend of 33 sen for the final quarter. Earnings per share were 34.2 sen.

Cumulatively, for the financial year of 2019 (FY19) ended Dec 31, BAT’s net profit tumbled by nearly 27% y-o-y to RM343.81mil – the lowest since 1999. Meanwhile, revenue was down by 11.14% y-o-y to RM2.51bil.

BAT blamed its poor financial performance on the illegal cigarette trade in Malaysia, which it said has reached record highs.

The company, which controls 53.7% of the country’s legal cigarette market, also attributed the decline in earnings to market downtrading as well as the absence of one-off factors reported in the same period last year such as GST removal one-off benefit and tax stamps refunds.

BAT’s full-year dividend was RM1.18 per share, which is the lowest since FY14.

Total legal industry volume declined by 10% compared to the same period last year largely attributed to rapid growth of illegal vaping products and continued high level of illegal cigarette incidence at 63%.

Despite increased enforcement actions from enforcement agencies, the result was insufficient to translate to legal cigarette volumes recovery.

“The group continued the cost reduction exercise further, rationalising its cost base significantly, leading to lower operating expenses of 12.7% (RM36mil) versus the same period last year.

“Given the pressure in the tobacco landscape, the group had started its internal reorganisation with the aim to aggressively optimise the cost base and set a new foundation for sustainable cost structure in the future.

“With this, a provision for redundancies of RM15mil was incurred in the last quarter of 2019, ” BAT said in a Bursa Malaysia filing.

It also noted that its restructuring exercise will continue into the first half of 2020 and will ultimately reduce 20% of the workforce

BAT was formed from the merger of Rothmans of Pall Mall (M) Bhd and Malaysian Tobacco Company Bhd on Nov 3,1999. Among BAT’s known cigarette brands are Dunhill, Pall Mall and Kent.

Over the past several years, the tobacco manufacturer’s share price has taken a major hit as investors’ interest waned due to weakening business prospects.

As a result, BAT’s market capitalisation has plunged by over RM17bil from its all-time-high of RM20.95bil on Sept 12,2014 to just RM3.63bil yesterday.

Over the past 12 months, the share price has fallen by 63% to RM12.70 yesterday.

Stoel, however, said that BAT’s current share price did not reflect the organisation’s strength and fundamentals.

“Unfortunately, as a corporate entity we cannot go at it alone to resolve the illegal cigarettes trade issue. The government must be held accountable and radical actions such as demand driven solutions that include a review of excise duties must be explored.

“You need to allow legal players the bandwidth to introduce illicit fighters, otherwise we foresee that the entire legal industry will soon give way to illegal cigarette syndicates who do not abide by any laws nor pay taxes, ” he said in a separate statement.

Source: The Star

https://www.thestar.com.my/business/bus ... at-retires
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Re: British American Tobacco

Postby winston » Fri Feb 21, 2020 11:34 am

not vested

British American Tobacco (ROTH MK)
4Q19: Earnings Surprise As Volume Rebounds Against Leaner Opex


BAT’s 4Q19 results soundly beat expectations.

While some seasonality and channel stock-ups boosted volume growth, newly-launched Glo saw encouraging uptake.

On the back of improved product mix thanks to Glo, opex was well contained, to our surprise.

Valuations are at a multi-year low and coupled with impending regulation on vaping as a catalyst, we upgrade BAT to BUY from HOLD with a higher target price of RM15.33 (from RM12.92).

Source: UOBKH

https://research.uobkayhian.com/content ... 4075e9322f
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Re: British American Tobacco

Postby winston » Fri Feb 21, 2020 2:23 pm

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BAT gaps up, rises as much as 9.9% on dividend, earnings outlook

by Surin Murugiah

KUALA LUMPUR (Feb 21): Shares in British American Tobacco (M) Bhd (BAT) gapped up this morning and rose as much as 9.9% after it posted a net profit of RM93.86 million in the fourth quarter ended Dec 31, 2019 on the back of revenue of RM662.45 million.

BAT declared a fourth interim dividend of 33 sen per share, which amounts to a RM94.22 million payout, payable on March 18. This brings its full FY19 dividend to 118 sen versus 155 sen for FY18.

At 10.31am, BAT was up 8.66% or RM1.10 to RM13.80, valuing it at RM3.94 billion. The stock had earlier risen to a high of RM14.10.

Meanwhile, Hong Leong IB Research (HLIB) maintained its “Buy” rating on BAT at RM12.70 with a higher target price (TP) of RM15 (from RM14.66) and said BAT’s core net profit of RM361.1 million (y-o-y: -22.9%) was above expectations, due to higher sales volumes and lower opex.

In a note today, HLIB said it expects BAT to continue to reduce costs in light of decline in sales volume.

“BAT guided they intend to continue the process of reducing staff headcount in FY20. The entire headcount reduction is expected to result in annual cost savings of about RM35 million.

“Furthermore, we expect BAT to spend significantly less on A&P given the reduction in potential market size. Given the unreasonably high price of premium brand Dunhill, we expect consumers to continue to down trade to VFM brand Rothmans, which has grown from 3.2% of the total legal market at the start of FY18 to 6.7% currently,” it said.

HLIB raised its FY20/21 earnings forecast by 2.2%/2.4% to account for lower operating expenses going forward.

“After adjusting for higher earnings, our DCF based TP (WACC: 9.5%, TG: 2.5%) is increased from RM14.66 to RM15.00,” it said.

Source: The Edge

https://www.theedgemarkets.com/article/ ... gs-outlook
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Re: British American Tobacco

Postby winston » Mon Feb 24, 2020 7:35 am

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Affin Hwang trims forecasts for BAT amid falling industry volume

KUALA LUMPUR: Despite beating earnings expectations in 2019, British American Tobacco (Malaysia) Bhd (BAT) continues to operate in a challenging market, as the total industry volume continues to decline.

Affin Hwang Capital research said in a Friday note that it remains cautious over prospects as the illicit cigarette trade looks likely to stay, given enforcement actions that are insufficient to counter its growth.

The research house has a hold call on BAT, and slashed its price target on the share to RM11.50 from RM19.20 previously.

"We trim our 2020-21E EPS forecasts by 7-12% and lower our terminal growth rate to 1% (from 2%), as enforcement activities have failed to yield desirable results," it said.

"Yields of c.8% may not present enough appeal to accumulate the stock given the risk of further earnings contractions, in our view," it added.

In 2019, BAT's revenue fell 11% year-on-year (y-o-y) to RM2.5bil as total legal industry volume shrank 10% from the previous year due to the high level of illegal cigarette incidence.

Its Ebitda margin was down two percentage points over the year, partly on the downtrading towards value-for-money cigarettes.

Minus restructuring costs, core net profit came to RM361.1mil, which was 19.6% lower y-o-y.

The results beat Affin Hwang's and consensus estimates at 109% and 108% of their respective full-year forecasts.

"The variance to our forecast mainly arose from the higher-than-expected seasonal volume sales trend during the final quarter," it said.

Source: The Star

https://www.thestar.com.my/business/bus ... try-volume
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Re: British American Tobacco

Postby winston » Mon Feb 24, 2020 9:40 am

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British American Tobacco(ROTH MK)
Share Price: MYR12.70
Target Price: MYR19.90
Recommendation: Buy

4Q19: beat expectations

4Q19 results were above our expectations, helped by lower-than-expected operating expenses.

We lower our FY20-21E net profit by 5% p.a. on weaker industry volume growth and consumer down-trading.

We also raise our WACC assumption to 8.6% (from 8.1% on heightened ESG concerns), resulting in a lower DCF-based TP of MYR19.90 (-17%), which translates to an implied 17.6x FY20 PER (-1SD to LT mean).

YTD, BAT’s share price has fallen 65% and we believe the negatives are priced for now.

Maintain BUY.

Source: Kim Eng

https://factsetpdf.maybank-ke.com/PDF/1 ... db665b.pdf
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Re: British American Tobacco

Postby winston » Mon Feb 24, 2020 2:21 pm

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BUY (Upgrade from FULLY VALUED)
Last Traded Price ( 20 Feb 2020): RM12.70 (KLCI : 1,534.98)
Price Target 12-mth: RM17.10 (35% upside) (Prev RM16.30)

What’s New
4QFY19 earnings beat expectation driven by improved sales volume and lower operating costs
Illegal cigarettes market share dropped from 72% to 68%
Increase FY20-21F earnings forecast by 27-33% on better sales volume and cost control
Negatives priced in; stock currently trading at -2 SD of 3-year mean; upgrade to BUY with TP of RM17.10 and dividend yield of 8%

Source: DBS

https://researchwise.dbsvresearch.com/R ... =fbgfekiia
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Re: British American Tobacco

Postby winston » Wed Mar 04, 2020 10:41 am

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British American Tobacco Malaysia: Still Too Early To Turn Positive

Summary

Illegal cigarettes continue to be the key headwind for BAT Malaysia, as their market share in Malaysia hit a new peak of 68% in 2019.

Potential re-rating catalysts for BAT Malaysia are regulatory in nature, which include more effective enforcement actions and the legalization of vaping in the country.

However, these catalysts are likely to take a longer-than-expected time to be realized, with a new prime minister and coalition government recently put in place in Malaysia.

BAT Malaysia currently trades at 10.7 times consensus forward FY2020 P/E and offers a consensus forward FY2020 dividend yield of 8.9%.

Source: Seeking Alpha

https://seekingalpha.com/article/432913 ... n-positive
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Re: British American Tobacco

Postby winston » Fri Mar 13, 2020 11:38 am

not vested

British American Tobacco (ROTH MK)
Near-term Headwinds But Bargain Abounds


We like BAT over the longer term, with the policy on vaping a potential positive catalyst.

In 1Q20, sales could be muted as they were partially frontloaded to 4Q19 while COVID-19 could weigh on duty-free sales.

However, BAT’s restructuring efforts are coming to fruition, coinciding with increasingly diminished downside risk.

Furthermore, the stock is trading at -3SD of its 5-year trading mean while offering dividend yields of 10.3-10.5% for 2020-22.

Maintain BUY but trim target price to RM15.28.

Source: UOBKH

https://research.uobkayhian.com/content ... a5016361a7
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