KLCI Stock - BAT / 4162 - 2010 Quarter 3

Par Value: 0.50
Market Cap : 285530000*44.96 = 12,837,428,800 (Very Large)
NTA per share : (486870-411618)/285530 = 0.26 (Decreased)
P/BV : 44.96/0.26 = 172.9231
Forecast P/E now : (44.96-2.41)/2.2713 = 18.73 (High)
ROE : 151.99% (Decreased)
DY : 2.41/44.96*100 = 5.36% (Moderate)
Fixed Asset Turnover(4 year) : (2.5833+2.4364+2.65+1.9738)/4 = 2.4109 (High)
Liquidity Ratio : 733674/365403 = 2.0078 (Moderate)
Receivables Collection Period : (174899+168754)/2/(4027235/365) = 15 days (Good)
My Target Price : 38.61+2.41 = 41.02 (PE 17, EPS 2.2713, DPS 2.41)
My Decision : NOT BUY unless price below 43
My Comment : Revenue and profit QbQ decreasing, good cash flow, high debt and increasing, navps decreased
Technical Support Price : 43
Risk Rating : MODERATE
OSK Target Price : 38.75 (21 Oct 10)

My notes based on 2010 quarter 3 report (number in '000):-

- The Group’s volumes had increased marginally by 1.3% for the year to date 30 September in comparison to the same period last year driven by trade speculation and improved economic conditions

- The Group’s market shares have also performed strongly by recording a year to date September market share of 60.2%, up 0.7 percentage points in comparison to the same period last year. This growth in market share was derived from BAT’s new offering Peter Stuyversant International which had gained 2.6% market share since its launch in June 2010. Additionally, the Global Drive Brands, Dunhill, Kent and Pall Mall have remained resilient maintaining their market share in comparison to the same period last year. The Group continues to lead the premium segment of the industry and with the addition of Peter Stuyversant International has an additional offering in the value for money segment

- For the nine months to 30 September, the Group’s revenue was 3.6% higher compared to 2009, from higher excise, pricing and increased volumes, partially offset by unfavourable pack size mix due the ban on packs less than 20 sticks. However, Net Turnover (Revenue less Government levies) had decreased by 0.3% during the same period. Consequently, Profit from operations declined by 5.8% in comparison to the previous year from the decrease in Net Turnover, higher cost of Dunhill Reloc packs, market returns from withdrawal of packs less than 20 sticks and, increased marketing expenditure from the launch of Peter Stuyversant International

- The strong performance of Dunhill in retaining its market share and the strategic introduction of Peter Stuyvesant to capture potential down-traders, in June, has seen BAT grow share despite the withdrawal of packs less than 20 sticks limiting the financial impact of the withdrawal to the lower margin on 20s packs

- Profit after tax only declined by 4.4% from 2009 mainly from operating profit movements, marginally higher finance costs, due to the timing of bond refinancing in 2009, and lower effective tax rate from revised tax payable for 2009

- Estimate next 4Q eps after 2010 Q3 result announced = 0.5977*4*0.95 = 2.2713, estimate PE on current price 44.96 = 18.73(DPS 2.41)
- Estimate next 4Q eps after 2010 Q2 result announced = 2.4323(7% drop from 2.6154), estimate highest/lowest PE = 19.56/16.8 (DPS 2.36)
- Estimate next 4Q eps after 2010 Q1 result announced = 2.4323(7% drop from 2.6154), estimate highest/lowest PE = 17.53/16.31 (DPS 2.36)
- Estimate next 4Q eps after 2009 Q4 result announced = 2.4323, estimate highest/lowest PE = 17.82/16.06 (DPS 2.36)
- Estimate next 4Q eps after 2009 Q3 result announced = 2.4323, estimate highest/lowest PE = 17.99/16.1 (DPS 2.35)
- Estimate next 4Q eps after 2009 Q2 result announced = 2.8448, estimate highest/lowest PE = 16.36/14.54 (DPS 2.65)

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