British American Tobacco Share Discussion Threads

[glassman] 12/11/2018 19:48

Smokers will not quit if their favourite brand is not available,they will smoke a different one.BATS will still sell the same amount of cigs

[this_time_its_different] 12/11/2018 18:21

STRONY BUY, FDA IS BLUFFING.

[essentialinvestor] 12/11/2018 18:06

M, John Kingham's article on Seeking Alpha from last April
is worth a read.

[philanderer] 12/11/2018 18:01

British American Tobacco: Bottom Is Close

[philanderer] 12/11/2018 17:49

ken , a moving day yesterday.

Many in the village procession wore family medals and the tinkling sound they made as we walked to the memorial was very poignant. Our village was also chosen as one of the thousand to light a beacon last night.

An unforgetable day. May those courageous people who made the ultimate sacrifice rest in peace.


Luck with your new purchase, I added a few at 2995p ;-)

[this_time_its_different] 12/11/2018 17:44

Tobacco is defensive since their products are used in booms and recessions. Tobacco sales are rising in EM markets, with population growth there will be more smokers in 20 years than there are now. The problem is the regulation. No industry is as regulated. If your investment horizon is 10 years plus, this is a good entry point. I see a slow climb to £40 over the next year and to £50 over the next 2-3 years. The divi is safe for now. What would help is the FDA removing these flavoured vapes.

[montyhedge] 12/11/2018 17:35

Must admit I can't buy shares in a company that still sell cancer sticks. Vapour seems the way to go at least.

[volsung] 12/11/2018 17:31

How can a tobacco company be defensive? People all over the world are being encouraged to stop smoking. They can't even advertise or have their own design packs.

[sauron] 12/11/2018 17:23

Essentialinvestor, yes, I agree no longer defensive. lonrho, BATS and IMB yields are also nearly equal now. I think the "Next Generation Product" phrase is misleading as it seeks to draw comparison with the tech world. It implies that most smokers will migrate to these products and there is no evidence that will happen. It may be sufficiently misleading to be challenged by financial regulators at some point.

[minerve] 12/11/2018 17:23

Essential

I'm not so sure your concern is warranted. I understand that there will be competition but when it is really an issue for big tobacco they will use their muscle if necessary. The game is all about economies of scale and logistics and these small companies selling vape kits and liquids will be steam rollered over when the time comes.

Decades ago it was the same situation for leaf tobacco. Nothing really has changed and even channel shifts will be managed. At the end of the day, the product still has to be manufactured, marketed, boxed, transported, approved and delivered regardless of whether it is to a local retailer or the home. The company that masters the economies of scale, logistics and marketing will be the winner. I wouldn't bet against big tobacco even with JUUL creating a lot of hype ATM. It is a bit similar to Tesla and the rest of the car manufacturers. Just have to make sure complacency doesn't set in. I don't think it has, if anything big tobacco is more focused than it has been for a long time.

IMO & DYOR

[berkshires thataway] 12/11/2018 17:19

I've been watching BATS for some time (I already hold IMB) and planned to invest if it dropped below my arbitrary target of £30.

I am not too concerned about the FDA news, for the same reasons many have posted below. I therefore almost pushed the button today but I was inspired to do a fresh review of some of the numbers beforehand. There are a few red flags which I just can't quite get comfortable with:

- Debt levels are pretty crazy - £50bn. Based on the current market cap, that implies an enterprise valuation of c. £120bn. I think that annualised EBITDA post Reynolds is around £10bn (although there's very little information around to work this out - another red flag for me), so that's a 12 * EBITDA multiple. I consider this to be quite toppy for a business in a low growth sector
- Most of that debt is denominated in USD, when a good chunk of earnings comes from GBP, which is not helpful with USD in the ascendancy
- The dividend yield is only high because the business is paying out most of its earnings, not because the equity value is low
- Said dividend doesn't look massively sustainable in the long run - it's about 85% of FCF, which leaves very little cash to use to pay down debt or to invest in nextgen product development

On that basis, it feels to me like the recent falls are bringing the price closer to a level I would consider 'fair'. Whilst they may not fall further, this leaves limited future upside.

PS - it's also audited by KPMG which doesn't fill me with confidence

[essentialinvestor] 12/11/2018 17:09

sauron, it's a key point for longer term profitability,
there are so many companies selling Vape kits and liquids,
big tobacco no longer has the monopoly (as they do with conventional sticks)
and with online buying these new entrants can sell on Amazon etc.
The sector is no longer a safe defensive.

May be the current X allows for some of this.

[lonrho] 12/11/2018 17:04

BATS 2019 p/e now forecast at 9.3 IMB is 9.5, lost all its prior premium rating.

[essentialinvestor] 12/11/2018 16:54

Why the 'Strong Buy' posts today then?.

[sauron] 12/11/2018 16:54

Bought a few at 2987 but not a conviction buy. Also suspect they are overstating the future of so called NGPs. Barriers to entry to NGP market are low hence their attempts to link to tobacco through “heat not burn” that I suspect offer little beyond that of pure vape products.

[minerve] 12/11/2018 16:54

I made a lot of money holding Reynolds American when BATS bought. I guess I am now on the opposite side of the fence.

[this_time_its_different] 12/11/2018 16:49

essential, I got out at £33 and invested the money into other stocks straight away, I have no plans on holding a stock which doesn't behave like a defensive but more like a newly floated AIM stock.

[essentialinvestor] 12/11/2018 16:47

Ttid, would it be fair to says it's not been a particularly lucky stock for you!.

[ken tennis] 12/11/2018 16:46

PHIL I couldn't resit the opportunity of taking some of these just before close after reading the posts on here quarterly divi running at 6.52% per anum.

Like the comments on here say if they are smoking then just because one brand is taken away they're not all going to bloody quit they just move to another brand.

PHIL hope all went well at the remembrance day gathering wearing your medals.

ATB Ken

[this_time_its_different] 12/11/2018 16:44

BATS was a strong buy at £38, but that was given that the FDA would not be cutting nicotine, trying to ban menthol cigarettes and generally f-u-c-k-i-n-g all tobacco stock investors.

[minerve] 12/11/2018 16:40

BATS exposure to the circus we call the US is much higher. Bring on more clowns that's what I say. There isn't anywhere near enough! LOL

[essentialinvestor] 12/11/2018 16:33

You can see the difference in the % drop of IMB v BATS today.

BATS multiple premium v IMB pretty much gone.

[speedsgh] 12/11/2018 16:28

@crypto - BATS website shows XD 27/12/18 for Q4 payment of 48.80p on 7/2/19.