British American Tobacco Share Discussion Threads

[philanderer] 04/8/2020 11:06

GOLDMAN SACHS CUTS BAT PRICE TARGET TO 3,870 (4,000) PENCE - 'BUY'

[buywell3] 03/8/2020 22:45

The problem is Covid-19 now as well as debt for both companies

WHO Director-General Tedros Adhanom Ghebreyesus has just said

"there may never be a silver bullet for Covid-19 "

the closest thing yet IMO to an admission of just how bad this Pandemic is becoming


Immunity or lack of is now the problem

Smoking and Vaping are known to be high risk factors for surviving Covid-19 regards lung damage/can't breathe

If Covid-19 stays with us then smokers and vapers will IMO pack it in and move onto patches or other substances.

If not , smokers and vapers will form IMO an increasing proportion of Covid-19 permanent lung damaged survivors or deaths ie smaller market

IMO dyor

[zicopele] 03/8/2020 22:25

It is...debt is not going away anytime soon. We will all be talking about it next year when the dividend is cut.

[badtime] 03/8/2020 20:53

Is this the same debt you've mentioned in your previous goodness knows how many times...LOL

[zicopele] 03/8/2020 17:54

Debt debt debt. £50bn is simply too much.

[scepticalinvestor] 03/8/2020 16:50

UT closed down AGAIN.annoying!

[stepone68] 03/8/2020 14:54

I've held BATS for 17 years. My CAGR including dividends is 18%. If BATS went bust tomorrow my CAGR would be 14%. I don't know what the future holds but I wish all my stock picks had done so well :-(

[scepticalinvestor] 03/8/2020 14:32

I didn't say that...

[polaris] 03/8/2020 12:52

With interest rates where they are then a big tobacco bond is actually a very good return for any bondholder. Now is clearly the time to get as many of those away as you can as management of big tobacco. It reduces overall interest payments and leaves more FCF to cover other debt reduction, such as revolving bank lines. Bond yield here is massive cf. treasuries so there will be a market.

There are members of my extended family who would rather cut down on food or buy cheaper food rather then cut down on their smoking and drinking. In a situation of higher stress then they will smoke and drink more!

Made the decision this morning on where things are wrt bottom of long term channels and am now long BATS and IMB. Both are oversold again and due at least some kind of bounce, whatever your feelings on the long term direction.

[scepticalinvestor] 03/8/2020 11:20

a pair of experts you two are not

[buywell3] 03/8/2020 08:40

2400 this week IMO

1999 soon as the markets realize Covid-19 wave 2 is in fact a tsunami

[buywell3] 03/8/2020 00:23

buywell has made the point about Net Debt here before

Check out the ---- Tangible Net Asset Value per share ---- of this and IMB

[badtime] 03/8/2020 00:13

:)Thumbs up

[polaris] 02/8/2020 23:43

@Minerve 2 - i am not disagreeing with you, the market is disagreeing with that viewpoint. The downtrend shows that. It has been going on for a few years now. How much debt reduction will satisfy the market? What does that even mean? If BATS can service the debt and the market is willing to support new bond issues then it isn't even a current problem, except for some reason it is.

@badtime - anyone can vote a post up but only blues can vote a post down. Just because you pay for a service does not make your point of view somehow more valid than others. It is what it is. It is used as a sport by some. I'll take the down votes all day when the content of the post is true. I'm just one of the hoi polloi railing against the privileged elite...apparently. ;-)

[minerve 2] 02/8/2020 23:20

Polaris

The revenue pool for tobacco is forecast to increase over the next decade. IMB and BAT have plenty of surplus cash flow after dividends to pay down debt. The aim will unlikely be to clear debt completely because, as you should know, efficient balance sheets have debt which also deters unwanted admirers.

[badtime] 02/8/2020 23:15

Sad state of affairs when someone is that bothered about a vote up or down on a bb lol

[zicopele] 02/8/2020 22:12

We are behind the curve on Imb.l

They have cut dividend. BATS is a year from.reducing divi.

[polaris] 02/8/2020 21:03

Big tobacco has been in decline since 2016. None of us can argue with that as the SPs are significantly lower today than they were 4 years ago. The question is whether it is a decline that will continue? Where is the bottom? Can you trade the channel?

The main reason i am here is that i spent a few hours this weekend looking at IMB, BATS and Altria for possible longs, given the recent falls. It's rare that i will short, unless the company is massively over-valued. That isn't the case here. Big tobacco seems to be at the bottom of recent downward channels and so seems open to longs rather than shorts.

Over last few years i have been long tobacco at various points and the arguments/discussions around net debt, FCF and dividends have played out again and again. Anyone who has been long for the last 4 years has traded capital losses for dividend returns. BATS has done a lot better than IMB for example, where capital erosion far outweighs the dividend returns.

FCF is an important aspect but the divis are also paid out of that..and principal (plus interest) on debt. In principle, BATS can pay off the debt over a 5-6 year period, assuming flat margin on falling sales volume (i.e. price rises match falling volumes). However, that would also mean zero dividend for that period and the share price would suffer for that. You cannot have your cake and eat it. It would take at least 10 years to retire the debt while also keeping the returns investors relatively happy.

IMO, it's not even about retiring all debt. TBH, the current interest rates favour carrying debt if you can service it, particularly if you can get a fixed interest rate coupon. Big tobacco can probably do that on quite high levels of debt. In fact, it has been doing this for a while. However, the 'market' wants debt ratios to come down fast and the SPs are being hit accordingly. This probably means cutting dividends (as IMB did recently) to release more FCF for debt repayment. share price then gets hit as the yield falls...rinse and repeat. That cycle will be broken at some point, just a matter of when.