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Friday, March 18, 2016

BAT Shutting Down Its PJ Plant (Updated)

BAT has announced that it will shut down its plant located in Petaling Jaya. This will lead to the retrenchment of 230 workers (here).


 via The Edge Financial Daily

The immediate impact will be mixed. The stock is trading near its long-term uptrend line support at RM53.00. I expect the uptrend line to hold. 


Chart 1: BAT's monthly chart as at Mar 17, 2016 (Source: ShareInvestor.com)

I expect the long-term benefit of the closure to the company will be positive. A good example is to look at is Panamy (then known as Matsushita)'s closure of its Bangi appliance plant in 2005. The share price has risen from around RM7.00 to above RM27.00 today. [In 2013, Panamy also closed its LCD plant in Shah Alam.]

 
Chart 2: Panamy's monthly chart as at Mar 17, 2016 (Source: ShareInvestor.com)  

I included here the upward trend in the financial performance of Panamy since the closure of its Bangi Plant in 2005.


Chart 4: Panamy's financial performance from QE31/3/2005 to QE31/12/2015

Based on the Panamy positive experience, I would recommend a HOLD on BAT. If the share price were to drop to RM52-53, it would be a long-term BUY.

 Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, BAT & Panamy.

1 comment:

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