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发表于 6-8-2008 04:04 PM
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06-08-2008: BAT is fairly resilient
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Investors are still wary of further volatility in the market. Despite some improvement in sentiment, trading volume remains relatively low and many are just sitting on the sidelines.
This may well be a good strategy, given the myriad uncertainties and clouded outlook for the local and global financial markets. Nevertheless, investors may also want to consider some stocks with steady yields.
British American Tobacco (BAT - RM40.50) has traditionally offered investors higher-than-market average yields. Its high dividend payout policy, in turn, provides a degree of support to the company’s share price.
The stock started the year at RM41.00, not far from where the shares are now trading. By comparison, the benchmark KL Composite Index is down by about 20% for the year-to-date.
We estimate BAT’s total dividends at about 260 sen per share in 2008, including the soon-to-be paid interim dividend of 113 sen per share, net of tax. This would earn shareholders a net yield of 6.4%, which far exceeds prevailing deposit rates.
Risks of more taxes
To be sure, the stock is not without risks. Operating conditions for all cigarette makers in the country are expected to remain difficult. The recent fuel price hike and resulting price inflation across the broader economy is putting a dent on consumer disposable incomes.
As such, they will be more inclined to down trade, including turning to exceptionally low-priced cigarettes and contrabands.
Industry volume sales for duty-paid cigarettes have fallen for four straight years - and appear quite likely to contract again this year. Although volume sales did pick up a little in 2Q08 from the preceding quarter, volume sales are still down 3.7% year-on-year (y-o-y) in 1H08.
How the industry fares for the rest of the year is highly dependent on the quantum of government tax hikes this year. There is speculation that more sin taxes are in the offing, including those for gaming and cigarette companies, to boost government coffers.
Cigarette companies are appealing for gradual annual increases to fight the rise in illicit trade. Sharp declines in their volume sales also mean lower tax revenue for the government. Smaller price increases, on the other hand, would allow consumers to adjust quicker and buffer the drop in volume sales.
BAT has adjusted well to keep profits afloat
Positively, BAT has adjusted to the recent years’ steep tax hikes as well as can be expected. It remains the clear market leader in the premium segment and is also doing well in the value segment with market shares estimated at 73.4% and 45.2%, respectively. The company’s driving brands are Dunhill and Pall Mall.
Net profit growth this year is estimated at 3.7% y-o-y to RM759.3 million or 266 sen per share. At the current price, BAT shares are trading at roughly 15.2 times earnings, which is fairly in line with most high-yielding consumer stocks.
http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_93147132-cb73c03a-21447f00-349ebed8 |
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