Tobacco bill delay slows BAT's vape entry


KUALA LUMPUR: There is an uncertain outlook for British American Tobacco (M) Bhd (BAT) as a delay in the launching of its vape products (VUSE) could have a negative impact on its prospects.

Hong Leong Investment Bank (HLIB) Research reported that a delay in the passage of the tobacco bill to the next parliamentary session in October will further postpone BAT's entry into the vape space.

"This would hinder VUSE from making significant inroads into the Malaysian market given the extensive range of existing vape products available," it said.

Furthermore, it said the growing availability of e-cigarette products is expected to gradually erose the market share of traditional cigarettes, which will affect BAT's sales.

In a filing with Bursa Malaysia yesterday, BAT announced a core profit after tax of RM89.5mil in the first half of the year, which was below expectations.

The bottomline represented only 35% and 36% of HLIB's and consensus full-year forecasts respectively as sales volume was lower than anticipated due to the resurgence of illicit market share, especially in 1Q, and the increased usage of vape products.

According to HLIB, while BAT's revenue rose 6.4% year-on-year due to the rebound in legal industry combustible volume and a 2.3ppt decrease in illicit market share, the core PAT was 35.7% lower due to a higher tax rate and operating costs.

"It is worth noting that BAT recorded a tax rate of 29.7%, exceeding the 29% recorded during the Prosperity Tax period last year, mainly due to non-deductible expenses," it said.

HLIB maintained "hold" on BAT, but slashed its FY23-25 core profit after tax projections, resulting in a downgrade of its target price to RM9.22 from RM10.86 previously.

Follow us on our official WhatsApp channel for breaking news alerts and key updates!
   

Next In Business News

QL resources to benefit from steady demand
Vietnam wood product exporters to leverage trade deal with UK
CBI: Business tax raid crashing UK private sector
Bangladesh wants to renegotiate power deal with Adani
Mah Sing’s to gain from demand for housing
Japanese firms boost capital expenditure as confidence holds up
Jakarta eyes nuclear power tech with US, Russia
Hanoi to build high-speed railway to Ho Chi Minh City
Uniqlo Vietnam hits 60% local production in five-year milestone
Job ads tumble 1.3% Down Under

Others Also Read