MORNING CALL:26/7/23

HLIB Research says BAT Malaysia’s 1H23 results once again fell short of expectations.

Transcript

00:00 In focus this morning is British American Tobacco Malaysia.

00:05 Hong Leong Investments Bank Research maintaining its hold recommendation on the stock, though

00:10 it lowered its target price from RM10.86 to RM9.22.

00:15 The counter ended trading yesterday at RM10.28.

00:18 BAT reported its first half results earlier this week, with Core PAT coming in 32% lower

00:25 year-on-year to RM89.5 million, that's just 35% of HLIB's full year forecast and 36% of

00:33 consensus estimates.

00:34 The lacklustre results were mainly due to lower-than-anticipated sales volume, which

00:39 was weighed down by the resurgence of illicit market share and increased usage of vape products.

00:45 On prospects, HLIB said the outlook for BAT has become uncertain, as the tobacco bill's

00:51 passage has been further delayed to the next parliamentary session in October.

00:55 The research house still believes BAT will not launch its vape products until a clear

01:00 and comprehensive regulatory framework is in place.

01:04 This could have a negative impact on BAT, since it disallows the group from capitalising

01:09 on the growing vaping trend in Malaysia.

01:11 HLIB trimming its Core PAT estimates by 21% for FY23, 18.1% for FY24 and 15.4% for FY25

01:22 to account for the lower-than-expected sales volume.

01:25 According to Bloomberg data, analysts are mixed on BAT, with 2 buys, 4 holds and 3 sells.

01:32 Average target price, RM10.05.

01:34 The stock last traded at RM10.28, so that's a potential downside of about 2%.

01:40 Thanks for watching.