For QE31/3/2018, BAT's net profit rose 23% q-o-q but dropped 16% y-o-y to RM96 million while revenue dropped by 9% q-o-q or 17% y-o-y to RM638 million.
Revenue dropped by 9% q-o-q due to decline in sales volume of 3.0% compared to immediate preceding quarter. The Group registered market share growth from 53.9% in the fourth quarter of 2017 to 54.7% in the first quarter of 2018, as Dunhill registered a 0.5ppt-increase in market share to 38.2% while Value for Money brands increased its market share by 1.2ppt to 30% and Aspirational Premium brands increased their market share marginally from 42 to 44% (despite a drop in volume). As a result of the lower volume performance, BAT's gross profit dropped 5.3% q-o-q. Operating expenses were 39.4% (RM40.6 million) lower than preceding quarter- due to the absence of provision of impairment for prepaid excise duties (compared to RM21 million provided in the preceding quarter), lower distribution & marketing cost and timing of other expenses. Lower operating expenses had more than offset the drop in gross profit- leading to a 23.2%-increase in operating profit. Higher operating profit flowed thru to higher PBT, PAT & NP.
Table: BAT's last 8 quarterly results
BAT's revenue has been on a decline for the past 3 years, with no sign of bottoming out. Profits have been declining in a zig-zag fashion - with the magnitude determined by provisioning exercise or timing of expenses.
Graph: BAT's last 45 quarterly results
BAT (closed at RM33.40 yesterday) is now trading at a PER of 20 times (based on the last 4 quarters' EPS of 164.70 sen). BAT has paid out quarterly dividend payment totaling of 162 sen over the past 4 quarters; thus giving a Dividend Yield of 4.85%. If BAT's revenue & profits were to stabilize, the stock will be an attractive stock as these multiples are fairly attractive for a well-managed MNC.
BAT is likely to be still in a long-term downtrend. It is now pressing against the 40-week EMA line at RM33.20.
Chart 1: BAT's weekly chart as at May 21, 2018 (Source: Shareinvestor.com)
The immediate support & resistance are at RM32 & RM36.
Chart 2: BAT's daily chart as at May 21, 2018 (Source: Shareinvestor.com)
Based on a still weak financial performance and a still bearish technical outlook, BAT is a stock to be purchased with caution. However once the company's revenue and profits have made a bottom, it could be a good stock to invest in as it is a well-managed company.
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