I would prefer debt at x2 or under before any buy back programme here.
Anyway, hopefully the upcoming update will be positive. This is cheap - if everything is on track. IMO naturally. GLA. |
 2 scenarios:
1. The company buys back shares which are yielding 10%. It therefore doesn't need to pay 10% out on the shares that it has bought back.
2. The company instead buys back debt. Say the debt is yielding 6%, then it doesn't need to pay out that 6%.
The idea is that it's better for the company to buy back shares at it will save 4% (10%-6%) in doing so.
However, if you think the debt is unsustainable and the company won't be able to make a debt payment or roll debt that is maturing, then clearly it is the debt that should be bought back. I don't believe that is the case for BATS, as is highly cash generative and has an ITC safety net (which they could sell).
Although buybacks get a lot of bad press, it really depends on at what price the buybacks are done. If you hold a share, it should be because you think it is cheap* and so holders should view buybacks as a tax efficient way of compounding their cash. If you don't agree (ie you can better select what to buy with the cash) then you probably shouldn't own the share in the first place (buy what you think is better).
-0x3F
*Someone mentioned yesterday that BATS is on a PE of ~4 if you back out the ITC holding! |
I'm missing something here guys - and it may be important to my opinion on BB's.
LLB: you mention a saving of 10% on dividend payouts and 0x3f confirms this same figure.
How? Are you making an assumption that about 10% of the current shares would be bought back and hence, in future, divi's would only be paid to the remaining 90% or is there a tax element at play that I'm unaware of.
Honest question - no angle intended.
Thanks. |
LLB, think this is a good point - Saving more on buying back shares(10% divi), than compared to buying back debt (<10%).
I don't feel that the current debt is an issue, as I read that generally net debit/EDBITDA of 2-3 is considered safe. The fact that they've been at 5.3 times without issue would back that up.
I think that the problem has really been the maturity profile of the debt, specifically debt due in next 5 years or so. I've been following this chart:
hxxps://www.bat.com/DOCYEQPP.html
At the start of 2023, several of the lines were above 4Bn, now nearer 3Bn. It looks like they've made significant progress in rolling or paying back the debt that is due in the near future. Maybe at nearer 3Bn, they'll consider restarting the buyback. |
#MCunliffe1, with the share price down from a peak of 5500 in 2017 and the RJN takeout, down to 2350 today from 3100 a year ago, but now the debt to EBITDA has been cut in half, the Vape juice sector is about to be regulated and BATS are very neatly positioned with c50% of that market sewn up already..
Keep buying the weakness stake building should be a good long term strategy for the 10% yield until the share price picks up, if they do a BB in H2-2024 and miss the weakness we will have to wait and see..
At FY-2017 - total borrowings were GBP49.50BN, an increase of 30BN on 2016 for the RJN takeout.
At H1-2023 - total borrowings were GBP42BN with net debt 37BN
Debt is still way too high IMO, it needs to come down, but when you can save 10% on your dividend payouts with a BB, maybe a split is a good compromise..? |
The company expects 50 per cent of its revenues to be from these less harmful, non-combustibles by 2035, up from 17 per cent today. Leverage is also coming down with net debt to EBITDA having declined to 2.7 times in 2023 from 5.3 times in 2017, making additional stock buybacks and/or a dividend hike increasingly likely.. :o) |
Indeed, optimism there is. Thanks 0x3f.
I liked the statement:
“The FDA has confiscated more heads of romaine lettuce than it has illegal e-cigarettes in the last five years.”
Priceless. |
Thanks ox3f - reasons for optimism |
Good summary |
Comparison of Altria and BATS
hxxps://uk.investing.com/news/stock-market-news/altria-vs-british-american-tobacco-which-stock-is-smoking-hot-right-now-3320699 |
Good to see PM and BATS have come to an agreement regarding patent litigation for NGPs going forward between the two of them.I'd rather see stakeholders returns from profits made, rather than lining the pockets of expensive lawyers. |
Altria was up 4% in NY yesterday
Hopefully BATS will follow suit when they report |
NICE TO SEE ITS HOLDING ITS SMALL RISE AFTER PAYING DIVI.. |
Cracking divi landed into my account yesterday. Now looking for when to reinvest it. |
It's not the asset but the capital allocation after they bought it. Should have not increased the dividend and refinanced long term when interest rates were zero. Newport and Kent are gems. |
bti up 2% at end of day so could be a good rise in the morning here. 2360p possibly |
Reynolds massive writedown suggests massive overpayment. They took on too much debt for a vanity asset. |
Your first sentence is accurate, zicopele. |
They can't afford the buiyback. Lower debt and maintain dividend.
Debt has been too high since the disastrous purchase of Reynolds.
PS I should have sold BATS and bought more PBR for a proper dividend. |
$1bn buyback announced by Altria today
BATS should follow suit in H2 |
Yes, nice dividend into my 'ii' account.
-----------------------
Liontrust duo prepared for a short-term hit at BATS
Short-term growth will take a hit from increased investment at British American Tobacco (BATS) but longer-term it will reap the benefits, says Liontrust duo Julian Fosh and Anthony Cross.
The Citywire Elite Companies AAA-rated tobacco giant is a top 10 holding in the managers’ Liontrust UK Growth fund, where it makes up 2.4% of the £37m portfolio.
A trading update at the end of the year saw BATS downgrade 2023 organic growth guidance to the low end of its 3%-5% range as macroeconomic pressures impacted US cigarette sales, pushing the shares 6.3% over December.
‘BAT is writing down the balance sheet value of some of its combustibles division brands by around £25bn,’ said Fosh and Cross.
‘The company is also accelerating investment in its shift towards ‘smokelessR17; products such as vapes and nicotine pouches. These investments will depress short-term growth but are expected to contribute positively from 2026 onwards.’
Shares in BAT were trading at £23.52 on Wednesday.
citywire.com |
dividend reinvested |
63 is the decimal equivalent of the hexadecimal 0x3f.
Retired software developer and ex smoker :-)
Bourbon beckons - DGE needs all the help it can get.
Cheers 63.
UPDATE: dug out an old Cobol/2 booklet to check the ASCII codes. Hex 3F is the ? character
I once delivered some charity products to a house in the hills above Oldham. Their house number was depitced in binary on an acrylic, shaped house sign. Hubby was in I.T. Wife just rolled her eyes. |
Register for real-time alerts, custom portfolio, and market movers
Hot Features
Premium
