Highlights

MIDF Sector Research

Author: sectoranalyst   |   Latest post: Thu, 26 Nov 2020, 11:03 AM

 

BAT - the Light Is Still Dim

Author:   |    Publish date:


KEY INVESTMENT HIGHLIGHTS

  • 9MFY20 earnings disappoint
  • 3QFY20 net profit declined by 23.3%yoy to RM63.7m
  • Illicit products remain a challenge
  • Earnings revised by -12.0% for FY20E and -19.0% for FY21F
  • Downgrade to NEUTRAL with a revised TP of RM9.60

9MFY20 earnings disappoint. British American Tobacco (M) Bhd’s (BAT) 9MFY20 net earnings of RM176.5m accounted for 69% of our and consensus full year estimates. We have excluded RM3.1m of restructuring costs as we deem that as one-off. The lower than expected core net profit can be attributed to compressed profit margins due to lower sales volume. An interim dividend of 21.0sen was announced, bringing YTD DPS to 56.0sen.

3QFY20 net profit declined by -23.3%yoy to RM63.7m even though revenue was up by +7.4%yoy to RM617.5m. Net profit did not catch up with growth in sales mainly due to lower operating margin. The higher sales can be attributed to higher market share, which improved by 1ppt to 52.5%. The higher volume sold is supported by the introduction of “KYO”. Both “KYO” and Rothmans achieved 35.8% of the value segment, which is an improvement of 5.6ppt compared to a year ago. Meanwhile, The market share for Dunhill in the premium segment remains strong at 64.0%, unchanged quarter-on-quarter.

Sequentially, normalised net profit improved by 22.5% while revenue increased by 14.8%. The topline improvement can be attributed to higher volume sold due to the strengthening of its value segment. As a result, net profit increased in tandem with the better sales. On another note, the market share of illicit cigarette had further increase to 64.5% compared to 60.5% in the previous quarter. Meanwhile, volume from the duty free segment continues to remain suppressed due to the constraints in international traveling. Volume from duty free sales account for about 4% of BAT’s overall sales previously.

Illicit products remain a challenge. The company’s growth continues to be hindered by the growing tobacco black market, which has adversely affected the legal tobacco market. Although the group has launched the “Stop the Black Market” campaign earlier in 3Q to raise awareness, it requires more holistic measures by other stakeholders to improve the situation.

Source: MIDF Research - 30 Oct 2020

Share this
Labels: BAT

Related Stocks

Chart Stock Name Last Change Volume 
BAT 11.40 +0.04 (0.35%) 371,100 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Earn MQ Points while trading with MQ Traders Group
MQ Affiliate
Earn side income from MQ Affiliate Program
 
 

368  477  645  973 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 AT 0.205+0.005 
 KANGER 0.185+0.005 
 KGROUP 0.060.00 
 ASIABIO-OR 0.015+0.005 
 MTRONIC 0.115+0.005 
 FINTEC 0.105+0.01 
 IRIS 0.35-0.005 
 VIVOCOM 0.995+0.19 
 PA 0.16+0.01 
 BIOHLDG 0.31+0.02 

FEATURED POSTS

1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!

TOP ARTICLES

1. Jaks Resources - Jaks Hai Duong Power Plant Achieved Commercial Operation Date (COD) !!! DK
2. Should we buy Top Glove since it has been plunging due its 28 factories shut down? Koon Yew Yin Koon Yew Yin's Blog
3. VIVOCOM: End of Day Report (26 Nov 2020) See Jovin
4. Kelington Group Berhad ("KGB") - Above Expectations (TP: RM2.30; +35% upside) by Kenanga Research Investment Ideas - Value and Growth
5. 【Growth成长股】AWC Berhad (7579) – Benefit from Strong Order Book Amounted Close to RM1Bil Sanitize and Disinfection Healthcare Stocks
6. TOP 10 INTERESTING STOCKS WITH COMMENTS BY CALVIN TAN RESEARCH THE INVESTMENT APPROACH OF CALVIN TAN
7. TOP GLOVE LOCKDOWN AND SUPERMAX SHARE PRICE The way I see it
8. Top Glove’s 28 factories shut down should benefit other glove makers - Koon Yew Yin Koon Yew Yin's Blog
PARTNERS & BROKERS