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BAT plans new market strategy
Darshini M. Nathan
The Star (my), 2002-02-23
FRESH from announcing record results and a generous dividend payout, British American Tobacco (Malaysia) Bhd (BAT) is rolling out plans to capture new market segments, and possibly even regain lost market share in the value brand segment.
Several research houses which attended the company's briefing on Thursday said they had revised upward their earnings forecast for BAT, which reported a 20% jump in pre-tax profit to RMRM840.3mil for the 2001 financial year, from RM701.19mil the year before.
BAT has also recommended a final dividend of 104.4 sen, bringing the total dividend payout for 2001 to 245.4 sen per share. This is an increase of 44.4% on the dividend of 170 sen per share paid out in 2000.
The company told analysts at the briefing that it had made changes to the blend of its Perilly's cigarettes and re-launched the brand last month in a bid to attract a new market.
An analyst from Arab-Malaysian Securities said the research house was positive about the re-branding and marketing exercises carried out by BAT recently.
"The re-launch of BAT's Kent brand last year proved to be a success as the younger target segment identified by the company has helped to grow the brand's share of the total duty-paid local cigarette market to 1.3%,'' she said, adding that the Pall Mall brand was also recently re-packaged to take on competing brands like L&M and Winston.
She said, however, that it would be interesting to see how BAT planned to execute its re-branding and marketing exercises, which relied heavily on sporting events rather than point-of-sale advertising, especially with the media advertising ban on all tobacco companies.
On the November 2001 cigarette price hikes, the analyst said volume might decline slightly in the next six months before picking up again in the second half of the year, barring any further price increases in Budget 2003.
BAT also told the analysts it would try to maintain its dividend payout ratios, which currently averaged 70%.
An analyst from OCBC Research said BAT remained the firm's choice exposure in the tobacco sector in view of its above-industry-average profit margins and dividend yield of between 6% and 7%.
He noted, however, that BAT's corporate market share had declined one percentage point to 68% in 2001 owing to the fall in the market share of Perilly's, whose strength lay in the rural areas.
OCBC Research said there had been "intensified migration of the rural franchise to the illegal 'cheap whites' which are sold between 70 sen and RM1 cheaper than duty-paid cigarettes.''
The research house has raised its 2002 earnings forecast for BAT by 2.3% to RM650.8mil. It also expects the company to see 5% to 6% sales growth this year and in 2003.
OSK Securities, which is maintaining a buy on BAT shares, is of the opinion that the counter does not appear to be all that exciting in terms of growth for this year as industry volume is expected to remain flat.
"Also, management is still unable to ascertain the immediate effects of last November's price hike. They would probably be able to provide a better picture upon release of the company's first-quarter results in May," an analyst from the research house said, adding that BAT was still a solid company to hold on to.
He said the generous 104.4 sen final dividend recommended by the board had been higher than expected.
OSK Securities has forecast BAT's net profit to grow by 11%-12% to RM679mil for the current fiscal year.
BAT managing director Stuart Watterton had attributed the company's strong performance to improved margins in 2000 and 2001, owing to lower costs arising from synergy benefits, and rationalisation expenses of RM50mil in 2000 that were not incurred last year.
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