"At 2,780p, has @GB:UKX:FTSE 100 tobacco stock LSE:IMB:Imperial BrandsÂ bottomed out after a 43% slide in the last two years, making its bumper yield a bargain? Do advances in e-cigarettes/vaping offer growth to help offset the sense of tobacco as ..."
Well at least the drop dropped by 50% at the close to just 2.7%. Stop Press: iii now saying 2%.
Smoking may well be in terminal decline but it will take years if not decades for all smokers to give up or die. Also assuming no new users take up the habit. Can't see Govts banning it as they make far too much money out of taxing the evil weed.
BATS has increased revenue by well over 30% in the last 5 years and operating profit by 20%.
I think there is plenty of life in the old girl yet.
I sold out of these last year in May and July at £54.6 and £52.8 and am now thinking of dipping my toe back into big tobacco. These did me proud for the many years I held them, both in capital growth and divis, but Imperial look good too, and have a higher yield at the moment.
Er, top marks JT - it's the dunce's hat for me! I just about had the presence of mind not to worry when I saw GSK was down 20p-odd today, recalling that it (too) is XD, but IMB completely passed me by.
There is a good reason why I have always resisted a smirk whenever I see anyone on these boards making such a mistake - aware as I have been that I've made the same mistake myself, and doubtless would do again - today being the day, it seems...
Maybe I've just got too used to seeing IMB trashed for no apparent good reason, and I didn't even question it...
"The biggest concern is the level of debt, but we all knew about that at the time of the Reynolds take over, so I can't see that being the drag today."
I am hearing the suggestion the SP mark-down is merely a (belated?) FX adjustment. A prospective 7% drag to EPS, partly offset by benefit from lower US tax, means consensus forecast has to come down by some 5%. Not sure whether this is coming directly from the company or from the "consensus forecasters"...
Also a slight suggestion of organic growth being a touch light, though not by much (and against a wide range of forecasts), and they've clearly made this up elsewhere to leave underlying EPS either in line with or a bit ahead of "consensus" - whichever consensus number you choose to use!
Of course, like the debt levels, we already knew all about the FX (or should have done) - yes, the US is now a very big part of BATS, and yes, the USD has been weak. Only February, of course, and it can still change significantly... either way. But maybe the market was asleep?
For me, free cash flow is uninspiring, though that is not a new observation (from me) - on my figures, flat yoy at £3.2bn (though possibly slightly depressed by one-offs?). It again fails to cover the divi (0.7x), and at today's lower SP, offers a FCF yield of just over 3% - compare that to 9.3%/9.7% for IMB last 2 FYs! No contest...
Of course IMB is off in sympathy today too... again! Any excuse to smack IMB, I get it. But at some point, someone will "buy" those free cash flows.... either investors, or their industry colleagues in Japan or China, who you can be sure will be watching.
I am obviously biased, but while BATS no longer looks expensive and I accept you can justify some kind of valuation premium over IMB, I still say nothing like the yawning ravine implicit in current metrics. I was kind of hoping the gap would close with IMB outperforming rather than BATS slumping... but yo ucan't have everything.
Only had a quick scan at the results when they came out at 7, but I thought everything looked good & expected a rise this morning, especially after the recent weakness. Always difficult to compare year on year when there is a big take over; but things did look OK.
The biggest concern is the level of debt, but we all knew about that at the time of the Reynolds take over, so I can't see that being the drag today.
On today's figures, and the price dropping to nearly 4200 the PE in under 14.8 & the (well covered) yield is over 4.6. For such a huge company with wonderful track record, world wide sales, little competition, barriers to new competition, and held is so many top funds, this looks very cheap.
Companies of this size, already regarded as safe & good dividend payers do not raise dividends by 15% unless they are sure of future earnings.
"Can't see too much wrong so far apart from... So the volume decline was less than the market."
Yes, a strange one, this - all looks very solid, the commentary upbeat, and the big numbers (underlying earnings, the divi, etc) look fine and dandy. And overall volume declines is hardly new to Big Tobacco - look at the profit, look at the cash flow!
Always hard to say exactly where "expectations" were, of course... but could be just that the market currently "hates" Tobacco? Any excuse to trash it....
Falling fast -- there must be some news here, especially as such a +ve write up in the press.
I sold this one at 48XX in July 2017, but it's starting to look tempting again, especially as they have such a strong position in heat not burn products and the Reynolds strength on Vape.
This morning's RNS is good news, though strictly not news, more putting numbers to what was already known; but I don't think the market had factored it in.
Simplistically it means next year's EPS will be around 6% higher. Currently this is forecast to be 309 - giving a forward PE of 16; this would mean an EPS of 327, giving a forward PE of 15. That should give us a small tick up today.
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