British American Tobacco (M) Bhd (Oct 21, RM44.44)
Maintain hold at RM43.60 with target price of RM46.60: 3Q11 net profit came in at RM176.3 million (+3.3% year-on-year [y-o-y] but -4.3% quarter-on-quarter); 9M11 net profit of RM539 million made up 73% of our full-year estimate of RM735.2 million. This is slightly below expectations due to a one-off cost of RM12 million to restructure its distribution model.
3Q11 revenue grew 11.2% (y-o-y to RM1.1 billion lifted by a 3% growth in volume to 2.3 billion sticks, mainly driven by pre-budget trade loading. Excluding this, volume fell 1.4% y-o-y and revenue only increased 2.2% led by higher net pricing.
The overall market share posted a steady increase to 62% as of August 2011 led by its premium (market share: 72.3% versus 3Q10 71.6%) and value-for-money (VFM) (market share: 43.7% versus 3Q10 41.5%) segments. Earnings before interest and tax (Ebit) margin was lower at 22.1% (versus 3Q10: 22.8%; 2Q11: 24.1%) mainly due to the one-off restructuring cost.
We think an exemption from an excise tax hike in the recent Budget 2012 may help to stabilise the legal cigarette volume in 4Q11 while suppressing the rampant illicit trade. According to the March to May 2011 survey, illicit market share was high at 37.3% (versus 2010: 36.3%). However, the risk of excise tax remains as the government could increase it anytime without coinciding with the budget speech as seen in 2010.
BAT declared a third interim dividend per share of 60 sen net, bringing year-to-date DPS to RM2.10 (versus 9M10: RM1.77). This represents a 111.2% dividend payout versus our full-year assumption of 106% or RM2.69, implying a potential final DPS of about 59 sen in 4Q11, given its cash pile of RM318.5 million (RM1.12 per share) as at end-September versus historical levels of about RM200 million (70 sen per share).
We have trimmed FY11E earnings by 1.2% to account for the one-off restructuring cost for the distribution model. Maintain “hold” on BAT with a discount dividend model-based target price of RM46.60. — HwangDBS Vickers Research, Oct 21
This article appeared in The Edge Financial Daily, October 24, 2011.
Maintain hold at RM43.60 with target price of RM46.60: 3Q11 net profit came in at RM176.3 million (+3.3% year-on-year [y-o-y] but -4.3% quarter-on-quarter); 9M11 net profit of RM539 million made up 73% of our full-year estimate of RM735.2 million. This is slightly below expectations due to a one-off cost of RM12 million to restructure its distribution model.
3Q11 revenue grew 11.2% (y-o-y to RM1.1 billion lifted by a 3% growth in volume to 2.3 billion sticks, mainly driven by pre-budget trade loading. Excluding this, volume fell 1.4% y-o-y and revenue only increased 2.2% led by higher net pricing.
The overall market share posted a steady increase to 62% as of August 2011 led by its premium (market share: 72.3% versus 3Q10 71.6%) and value-for-money (VFM) (market share: 43.7% versus 3Q10 41.5%) segments. Earnings before interest and tax (Ebit) margin was lower at 22.1% (versus 3Q10: 22.8%; 2Q11: 24.1%) mainly due to the one-off restructuring cost.
We think an exemption from an excise tax hike in the recent Budget 2012 may help to stabilise the legal cigarette volume in 4Q11 while suppressing the rampant illicit trade. According to the March to May 2011 survey, illicit market share was high at 37.3% (versus 2010: 36.3%). However, the risk of excise tax remains as the government could increase it anytime without coinciding with the budget speech as seen in 2010.
BAT declared a third interim dividend per share of 60 sen net, bringing year-to-date DPS to RM2.10 (versus 9M10: RM1.77). This represents a 111.2% dividend payout versus our full-year assumption of 106% or RM2.69, implying a potential final DPS of about 59 sen in 4Q11, given its cash pile of RM318.5 million (RM1.12 per share) as at end-September versus historical levels of about RM200 million (70 sen per share).
We have trimmed FY11E earnings by 1.2% to account for the one-off restructuring cost for the distribution model. Maintain “hold” on BAT with a discount dividend model-based target price of RM46.60. — HwangDBS Vickers Research, Oct 21
This article appeared in The Edge Financial Daily, October 24, 2011.
