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Friday, July 20, 2012

BAT- bottom-line continued to grow

Results Update

BAT has just announced its results for QE30/6/2012. Its net profit increased by 13.5% q-o-q or 19.8% y-o-y to RM221 million while turnover increased 2.4% q-o-q & y-o-y to RM1.07 billion. The continued improvement in bottom-line was attributable to lower distribution cost after the change in distribution model in 2011 and the absence of merchandising depreciation following to a change in accounting treatment in Q4 2011.


Table: BAT's last 8 quarterly results


Chart 1: BAT's last 22 quarterly results

Valuation

BAT (closed at RM56.72 yesterday) is now trading at a PE of 22 times (based on the last 4 quarters' ESP of RM2.56). Compared to Nestle, which is trading at a PE of 30 times, BAT's current PE multiple could expand to 25 times- giving BAT an upside potential of 15%.

Technical Outlook

BAT broke above its range of RM44 & RM50 in January 2012 and it could continue with its multi-year uptrend. See Chart 2 & 3 below.


Chart 2: BAT's monthly chart from July 2002 to July 18, 2012 (Source: Tradesignum)


Chart 3: BAT's monthly chart from November 1993 to July 18, 2012 (Source: Tradesignum)

Conclusion

Based on continued improvement in financial performance & positive technical outlook, BAT's present uptrend is expected to continue.

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