Friday, May 04, 2012

BAT trading at an all-time high

Brief Introduction

British American Tobacco Bhd ('BAT') hardly needs any introduction. It is the market leader in the manufacture & sales of cigarettes & cigarette products.

Recent Financial results

BAT announced its latest quarterly results for QE31/3/2011 on April 23. Its net profit increased by 7.7% q-o-q or 8.9% y-o-y to RM195 million while its revenue increased by 5.6% q-o-q or 5.1% y-o-y to RM1.04 billion.

Table: BAT's last 8 quarterly results

Chart 1: BAT's last 21 quarterly results


BAT (traded at RM55.70 as at 4.15pm) is trading at a PE of 21.6 times (based on last 4 quarters' EPS of 257.6 sen). At this PE multiple, BAT is fully valued. However, BAT pays handsome dividend of RM2.81 per share for the last 4 quarters which translates into a dividend yield of 5%. At this dividend yield, BAT makes a good income stock.

Technical Outlook

BAT has broken above its triangle ('ABC') at RM50 in middle of February as well as its all-time high of RM52. The last time BAT broke above its triangle ('abc') & its then all-time high of RM38 was in early 2003. After that bullish breakout, BAT rallied to a high of RM52 in middle of 2004. Can BAT repeat its 2003-2004 performance again?

Chart 2: BAT's monthly chart as at April 30, 2012 (Source: Tradesignum)


Based on bullish technical breakout, BAT could be a trading BUY.

No comments: