Thursday, April 19, 2018

BAT: The Bottom could be in.

Today we are again seeing huge volume for British American Tobacco Bhd (BAT). As at 2:45pm, the volume traded for BAT was 1.67 million. BAT (at RM23.90 then) was up RM1.14 from yesterday close. I denoted this as “C”.

This huge volume and the price rally is the opposite of 2 previous days of huge volume in mid-Feb (denoted as “A”) and on April 17 (denoted as “B”). In the sell-off in mid-February, the share price dropped from RM33.00 to RM29.50. The sell-off on April 17 did not cause a noticeable drop in the share price.

These 3 days of huge volume suggests the presence of selling pressure in the market. The change in the price movement – from price decline to relative price stability and finally to price rally - suggest that BAT may finally have dropped to a price level that is cheap enough that we are witnessing a competition among the interested buyers. We can see it very clearly that these buyers are competing and it caused the share price to rally.

Chart 1: BAT's daily chart as at April 19, 2018_2.45pm (Source:

BAT is a well-managed MNC with a history of profit that stretches back as far as Bursa’s record is available. The last 2 years of lower profit was due mainly to the cost of restructuring as BAT closed its manufacturing plant and shifted its supply chain to a neighbouring country. This is a good opportunity to get into a well-managed company trading at very undemanding multiple.

Chart 2: BAT's monthly chart as at April 19, 2018_2.45pm (Source:

Graph: BAT's last 18 years revenue, profits and EPS/DPS

I think BAT is now attractive enough to buy since its peak at RM73 in late 2014. BAT’s PER is 13.8 times while its dividend yield is at a eye-popping 7.1%. I recommend this as a long-term BUY.

Note: For more on BAT, go to my earlier post.

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