KUALA LUMPUR: The business environment for legal cigarette players will continue to improve as movement restrictions are lifted, and concerted efforts are being made to combat illicit activity.
TA Securities Holdings Bhd noted that the level of illicit trade has dropped to 58 per cent from 64 per cent at the end of 2020, and the legal industry volume has grown 6 per cent year-on-year (YoY).
The firm said these fundamentals augur well for British American Tobacco (Malaysia) Bhd (BAT).
TA Securities noted that BAT’s nine-month (9M) financial year (FY21) earnings of RM219.9 million came in within expectations at 76 per cent and 80 per cent of the firm’s and consensus full-year estimates, respectively.
Revenue for 9M FY21 increased by 7.3 per cent YoY to RM1.78 billion, spearheaded by 7 per cent YoY growth in cigarette sales volume.
The company’s legal cigarette market share ticked up to 52.5 per cent, driven by growth across key product categories – with Premium up 2.1 percentage points (ppts), Aspirational up 0.8 per cent ppts and value-for-money up by 2.5 per cent ppts.
Operating cost dropped by 15 per cent YoY to RM153.0 million as the company’s restructuring efforts have significantly
improved its operating structure.
TA Securities said the performance was remarkable considering the Covid-19 situation was bad during the third quarter (Q3) FY21.
It was made possible as the company closely engaged its key customers to provide steady product supplies, the research firm said.
TA Securities made no changes to its earnings forecasts pending analyst briefing which will take place in November this year and maintains a Buy call with an unchanged target price of RM15.70 a share.
Source: New Straits Times
