Just for the yields. With tobacco taxes likely to be frozen in the
upcoming 2013 National Budget, legal cigarette volumes stand to gain as
sales of both illicit cigarettes and ELPCs priced below the minimum of
MYR7/box decline. The government's generous cash handouts should also
support near-term consumption. Despite these positives, poor pricing
power and escalating costs amid intense competition will likely drag
tobacco company earnings. At 18.2x 2013 PER, the sector is fairly
valued. Yields of 4.4% for BAT and 3.2% for JTI (which could offer a
special dividend in 2014) are the only reasons to HOLD both stocks.
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Source: Maybank Research - 3 July 2012
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