- British American Tobacco (BAT) reported a decent 1Q net profit
of RM195mil, making up 27% of our full-year forecast and 26% of consensus. We
consider the results to be largely in line with our and market expectations.
- Management declared the 1st interim tax-exempt dividend of 65 sen/share
for 1Q, representing a payout of 95%. Even though we had not expected any
dividends this quarter, we make no change to our FY12F DPS forecast as premised
on an equivalent payout.
- There are no earnings surprises this quarter, with BAT chalking up sequentially higher turnover
and net profit growth of 5% and 8%, respectively. This was mainly attributed to
higher cigarette sales volume (QoQ: 6%) and lower A&P expenses due to
timing differences; which was partially
negated by a higher effective tax rate of 25% (+4.6ppts) due to the absence of
reinvestment allowance in 1QFY12.
- On a YoY basis, revenue grew 5% mainly on the back of:-
1) a status quo in tobacco excise duty at 22 sen/stick; 2) a
reduction in illegal sales activities of sub-VFMs below the minimum price and;
3) a higher sub-contract manufacturing turnover. However, net profit was up a higher
9% YoY due to a decline in opex arising from lower A&P expenses and
distribution costs.
- Along with 1Q legitimate TIV which expanded 3% YoY, the group’s
3% increase in volume was predominantly driven by Dunhill with an enlarged
market share (YoY: 1.5ppts to 62.5%). We expect Dunhill to chart a higher
market share as it strengthens its brand equity further. As it is, the performance
of Dunhill Lights was encouraging, having breached the 3% mark for first time
within Premium Lights sub-segment.
- We also expect recently re-launched Dunhill Switch with a new
‘blue colour’ packaging and embedded mint flavour capsules to chip away market
share off close competitor Philip Morris’s Marlboro. BAT also launched Pall
Mall Mint back in February 2012 to stem its decline in the VFM segment. Apart
from these, it has two to three more new products in the pipeline for this
year.
- We maintain our HOLD recommendation on BAT with an unchanged
DCF-based fair value of RM49.10/share. While industry TIV appears to start off
on a positive note, high level of illicit trades and the proliferation of ELPC
continue to pose a real risk to material TIV growth. Moreover, the industry is
fraught with regulation risks. At this juncture, management is awaiting further
details from the Ministry of Health on the proposed reduction of nicotine level
in cigarettes.
Source: AmeSecurities
No comments:
Post a Comment