BAT Malaysia shares remains underpriced

ZARINA ZAKARIAH

KUALA LUMPUR: British American Tobacco (Malaysia) Bhd’s share of the local cigarette market has grown reasonably well but its share price does not match that. In fact, the company saw its share price decline in tandem with the drop in the size of the legal cigarette market here.

BAT Malaysia said there was a correlation between its share price and the size of the legal market, which fell to 41.7 per cent last year.

The stock fell to an all-time low of RM22.74 today before recovering to close at RM24.72.

BAT Malaysia managing director Erik Stoel said company was still unhappy over its share prices which had dived from RM40 a share in December last year.

"Of course, we are still not happy with the numbers (share price), but we are dealing with almost 60 per cent of illegal cigarette trading in the market, this is a structural issue that is not within our control.

"Although we see enforcements and security tightened, the measures taken have still not not been impactful and illegal trading numbers still kept going up and we urge the government and the relevant authorities to take an integrated and serious effort in dealing with this,” he said at BAT Malaysia’s annual general meeting today.

Stoel, nevertheless, said it had seen stable numbers last year after completing its business reorganisation and stronger performance in the legal market.

Last year, its market share increased by 1.4 percentage point to 54.6 per cent on strong demand for its flagship brands Dunhill and Peter Stuyversant.

Both brands recorded higher sales of 37.8 per cent and 7.5 per cent respectively, pushing the company's share in the premium segment from 59 per cent to 62 per cent.

Group revenue, however, dropped 20.1 per cent as a result of continued growth of the illegal trade here.

The company entered the Value for Money (VFM-lowest price in the market) segment with Rothmans last year, enabling it to achieve 30 per cent share of the segment.

Despite lower revenue, BAT Malaysia declared a 98 per cent dividend at 43 sen a share and stated its commitment to investing in Malaysia despite having to face challenges from the illegal market.

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