BAT shares down 0.9% following U-turn of prices

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KUALA LUMPUR (Sept 23): Following its surprise move to revert to its old prices for its cigarette brands, British American Tobacco (BAT) share are current down 0.93% as of 10.40am today.

The shares rose to a price of RM70.20 before settling at RM69.94 with a volume of 21,900 shares being traded.

Yesterday, in a move that stunned many industry analysts, BAT along with JT International Bhd  (JTI Malaysia) announced that they were reverting back to old prices for their cigarette brands. BAT made the U-turn barely two weeks after announcing the hike where a pack of 20s was raise by RM1.

BAT said in a statement yesterday that the decision to revert back to prices before Sept 8 was to remain competitive. Some analyst have said that the move was most likely due to competitors Philip Morris (MALAYSIA) Sdn Bhd has yet to increase the prices of their cigarette.

Research houses however have maintained a hold call for shares in the tobacco industry. Alliance DBS maintained a hold rating with RM67.15 TP. It also noted that the U-turn in the pricing was likely a reaction to Philip Morris’ decision not to raise their prices.

The research house also noted that the surprise move however will not impact its earnings projection for the company as “BAT will manage higher costs through its internal efficiency improvement programme".

“Also, we did not raise earnings after BAT announced the price hike on Sept 8,” it noted.

AmResearch has also maintained its hold call with an unchanged DCF-based fair value of RM66.30 per share.

AffinHwang Capital has maintained its underweight stance due to challenging environment and diminishing yield appeal for the industry overall. However it has maintained its reduce call for BAT with an unchanged TP of RM 62.40.

“We expect industry sales volume to remain depressed given rising inflationary pressures and a possible excise duty hike before the upcoming budget.

“Notwithstanding BAT estimated divided yields of 4% over the next three years, we see a dearth of re-rating catalysts for the company given that it is operating in a reasonably mature sector with limited growth prospects,” it noted.