Illustration shows BAT (British American Tobacco)
PETALING JAYA: Soon-to-be-implemented regulations on the consumption of tobacco and vape could cloud the outlook for British American Tobacco (M) Bhd
(BAT), says Affin Hwang Investment Bank.
In a report, the research house said measures taken by the government to discourage smoking and vaping is expected to be worsened by the public display of the bans.
“The ban on the public display of tobacco and vape products effective April 1, 2025 is likely to further decrease legal combustible and vapour product volumes due to reduced brand visibility for new customers,” it said.
It added that while the government measures are commendable for public health, they undermined the long-term growth prospects of the tobacco and vape industry, presenting challenges for BAT to sustain or grow its sales volume.
According to the research house, BAT’s Vuse products contain 4.8ml and 10ml cartridges, which are above the maximum allowance of three ml and the upcoming limit of two ml per cartridge or disposable pod set by the government effective from Oct 1, 2026.
The nicotine level right now at 30mg per ml will also need to be reduced to comply with the new regulation of 20mg per ml starting on Oct 1, 2025.
“We anticipate that BAT will launch compliant Vuse products in the first quarter of 2025 (1Q25) and we expect similar moves from other competitors,” it said.
Affin Hwang has maintained its “sell” call on BAT with a target price (TP) of RM5.36 a share.
Meanwhile, CGS International (CGSI) Research reiterated its “add” call on the tobacco group with a Gordon Growth Model based TP of RM9.77 a share.
CGSI Research said for 3Q24, BAT recorded a net profit of RM67.9mil, bringing the nine-month of 2024 (9M24) showing to RM135.1mil, mainly driven by lower marketing spend as BAT spent substantial investments to launch its vape product Vuse since 3Q24.
“We deem the 9M24 results in line with our estimates as the fourth quarter generally sees seasonally stronger sales, but above Bloomberg consensus estimates. We expect BAT’s earnings to improve y-o-y in 4Q24 on the back of lower marketing spend,” it said.
