KUALA LUMPUR (Oct 29): Shares in British American Tobacco (Malaysia) Bhd (BAT) rose as much as 4.49% or 64 sen to a high of RM14.90 in Friday morning trade (Oct 29) on Bursa Malaysia after the group announced its results for the third quarter ended Sept 30, 2021 (3QFY21).
At 10.30am, BAT had increased by 2.35% or 34 sen to RM14.78, making it the third top gainer on Bursa, with 306,900 shares transacted so far.
At RM14.78, it had a market capitalisation of RM4.22 billion based on its 285.53 million issued shares.
The stock had climbed 46.34% from RM10.10 apiece over the past one year.
The company's net profit for 3QFY21 rose 23.43% to RM78.68 million year-on-year (y-o-y) from RM63.74 million, boosted by an increase in market share. Quarterly revenue, however, slipped a marginal 2.31% to RM613.02 million from RM627.52 million.
For the nine months ended Sept 30, 2021 (9MFY21), the group’s net profit climbed 26.19% to RM213.41 million, from RM169.12 million a year earlier, while revenue grew 7.26% to RM1.78 billion from RM1.66 billion.
“The 9MFY21 core net profit constituted 74% of our full-year forecast, which put it within our expectations.
“As we expect BAT to draw better earnings q-o-q (quarter-on-quarter) for 4QFY21, we forecast its FY21 DPS (dividend per share) to reach 99 sen,” according to CGS-CIMB Research analyst Kamarul Anwar.
In a note on Friday, Kamarul cautioned that BAT’s group sales volume may not continue to chart further y-o-y growth in FY22 and FY23.
“Remember that the group’s sales only managed to reverse the y-o-y downhill months during the movement control orders. Now that Malaysia is slowly reopening its economy to usher in the Covid-19 endemic era, whatever extra cash these smokers had to spend during the lockdowns may have to be channelled to other expenses — e.g. petrol, dining out and day care for children.
“Even if bootlegged cigarette supply is vanishing, many smokers may not be able to afford to keep up their smoking habits. They may reduce or stop smoking altogether, turn to value-for-money cigarettes, or opt for vaporiser products and e-cigarettes that are much cheaper.
"We believe BAT needs vape legalisation as a catalyst for the stock. Legal cigarettes’ affordability issue has not changed since the pre-pandemic era, which makes us doubt whether BAT’s earnings can continue to grow,” he said.
CGS-CIMB reiterated its "hold" rating of BAT, but with a lower target price of RM14.38 (from RM15.40) as the research house rolled forward its valuation base year to FY22.
“Downside risks: More smokers switching to vaping and margin erosion from more down-trading. A further rise in the premium segment’s share of sales is an upside risk,” Kamarul noted.