BRITISH AMERICAN TOBACCO (BAT) - Non-Syariah & Unethical Stock (but with sticky customer)

Potential Catalysts for BAT

1. Regaining market share from illegal cigarette trade

Government appears determined to intensify enforcement efforts against illegal cigarettes to bring back forgone tax revenue.

The government has also invested RM700 million in scanning equipment that will be used at Malaysia’s entry points by end of 2019. Cargo scanners at entry points will increase efficiency and effectiveness of detecting contraband entering into the country.

2. Regulation on e-cigarettes and vaping
 

The e-cigarette and vape market in Malaysia remain unregulated. The health ministry will table a bill on the usage of tobacco, vape, electronic cigarette and shisha in Parliament by March 2020.

Tighter regulations would likely reduce supply of e-cigarettes and vape products as small private brands may not be able to comply. Higher compliance cost will be favorable to existing alternative cigarette products such as heat-not-burn(HNB) brands like IQOS by Philip Morris and Glo by BAT.

*Source - BAT report by Insider Asia.