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British American Tobacco Hikes Prices; Downgrade To ‘Sell’
Malaysia Daily Bulletin | 04 November 2015
  • British American Tobacco (Malaysia) has decided to raise list prices across its cigarette portfolio by as much as RM3.20 starting 4 November, following an increase in excise of more than 40 percent announced by the Malaysian government on 3 November.
  • Hong Leong IB (HLIB) Research noted that whilst it did not discount an off budget excise duty hike, it did not anticipate that the excise duty hike to be of this magnitude.
  • The research house said that the quantum of the increase in prices was unprecedented and believes that the latest changes will decimate the legal industry volume, which as it stands is down 11 percent year-on-year in the month of September.

Significance: Coupled with the challenging economic backdrop, diminishing consumer spending power as well as competition from the illicit and vaping industry, HLIB Research has downgraded the stock to ‘Sell’ with a lower target price of RM53.30 to reflect the headwinds ahead.

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