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Tobacco and Smoking Control Bills will impact  BAT 4162 BRITISH AMERICAN TOBACCO (MALAYSIA) BERHAD's customer base, says HLIB Research

In a note, Hong Leong Investment Bank Bhd (HLIB Research) said cigarette sales volume is only anticipated to recover steadily in the second half of 2022 (2H22) due to the reopening of the economy.

KUALA LUMPUR: British American Tobacco Malaysia Bhd's (BAT) is expected to deteriorate in the near term due to potential consumer down-trading in the current high inflationary pressure environment.

In a note, Hong Leong Investment Bank Bhd (HLIB Research) said cigarette sales volume is only anticipated to recover steadily in the second half of 2022 (2H22) due to the reopening of the economy.

"Nevertheless, we expect consumer down-trading in the near term, which will result in a deteriorating margin," it said in a note.

Separately, HLIB Research also said that BAT expects the Tobacco and Smoking Control Bills tabled to Parliament in July to be fully implemented by the third quarter (Q3) of 2022.

The bank-backed research firm said implementing the smoking bills will be a threat to BAT as the generational bans will result in a shrinking customer base over the long term.

"While vaporizers and e-cigarettes will also be regulated under the smoking bills, allowing BAT to introduce its vape products, we opine that the proposed ruling of RM1.20 per millilitre (ml) excise duty on vape gels and liquids could fuel an illicit market.

"This could hamper BAT's vape products from penetrating the market," it said.

Meanwhile, HLIB Research said BAT's first half of 2022 (1H22) profit after tax (PAT) of RM131.9 million came within the firm's expectation.

The results were within the firm's and consensus expectations, accounting for 52.8 per cent and 51.6 per cent, respectively.

"PAT arrived after adjusting for Prosperity Tax, which is estimated to be RM2.69 million," it said.

HLIB Research has lowered BAT's target price to RM11.13 from RM12.14 and reiterated a Hold on the stock reflecting the government's effort to curb smoking habits via the soon-to-be-implemented generational ban.

https://www.nst.com.my/business/2022/07/815507/tobacco-and-smoking-control-bills-will-impact-bat-malaysias-customer-base

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