KUALA LUMPUR: CIMB Equities Research raised its dividend discount model based target price slightly to RM55.50 as it rolled over its valuation year and introduced the earnings per share (EPS) for FY18.
“Our Reduce rating remains unchanged. Lower-than-expected sales volume could be a de-rating catalyst. We prefer the brewers for dividend yield,” it said on Thursday.
Commenting on the FY15 earnings, the research house said the net profit of RM910m was spot on with its full-year forecast and consensus.
“FY15 sales volume declined 13.5%, marginally better than the industry (-13.6%),” it said, adding the 4Q15 interim dividend of 78 sen a share brought full-year dividend per share to RM3.12, in line with expectations.
CIMB Research said volumes were hit by steep excise duty hike. BAT’s FY15 revenue fell 4.5% on-year, while net profit was flat (+0.1% on-year).
Total sales volume fell 13.5%, marginally better than the overall industry decline of 13.6%, led by the strong performance of Dunhill and Peter Stuyvesant.
Domestic and duty-free volume fell 12.6% yoy, while contract manufacturing fell 24.8% on-year, due to lower sales in Australia, South Korea, Philippines and Taiwan.
On a quarter-on-quarter basis, domestic and duty-free volume registered a 19.2% decline due to the unprecedented excuse duty hike in November 2015.
“Contract manufacturing volumes fell 8.5% on-quarter. Revenue fell 9% on-quarter as a result, while operating expenses was 11% higher on-quarter driven by the timing of marketing expenditure. Dunhill, still the leader
BAT continued to gain market share, which reached 62.1% at end-Dec (+0.9% pts vs. full-year 2014), with Peter Stuyvesant fuelling the growth in the aspirational premium segment.
Management cited downtrading from competitor premium brands such as Marlboro for Peter Stuyvesant’s strong performance. Dunhill maintained its market leadership position at 46% (flat vs. 2014), a commendable performance given the strength of the illegal market and downtrading by consumers.
BAT highlighted that legal volumes continued to stay under heavy pressure due to the steep excise duty hike in September 2013, November 2014 and the shocking 36% increase in November 2015.
“Combined with the pressure on disposable incomes post GST, we expect the illegal market to remain a problem despite improved regulatory clampdowns and raids by the Malaysian customs department.
“With consumer sentiment continuing to stay weak, we expect the illegal market share to rise in the next few quarters,” it said.
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