BAT: Green Shots of Recovery

Result Update

For QE31/12/2021, BAT's net profit dropped 9.4% q-o-q or 2.0% y-o-y to RM71.5 million while revenue rose by 40.6% q-o-q or 30.5% y-o-y to RM862 million.

As explained in its press release, BAT "performed remarkably in 2021 with the volume growing for the first time since 2002, profit growing for the first time since 2015 and strong quarter on quarter improvement in our financial performance. The growth momentum comes from an increase in volume and share of market which, in turn, improved revenue and profit from operations. The volume increase was mainly due to the reduction in the tobacco black market by 6.1% compared to FY2020. This growth in volume led to a revenue of RM2.6 billion for FY2021 compared to RM2.3 billion in FY2020 (growth of 14%) and a profit from operations of RM411 million compared to RM346 million in FY2020 (increase of 19%)."

Table 1: BAT's last 8 quarterly results

In fact, the improved performance was seen mainly in the last quarter, ie. QE31/12/2021. See the sharp spike in the revenue in the graph below.

Graph: BAT's last 53 quarterly results

However, BAT's bottomline did not increase because the company made additional charge-off in the form of inventories write-down and restructuring expenses. See the table below.

Table 2: Changes in P&L items in QE31/12/2021, QE30/9/2021 & QE31/12/2020

Valuation

BAT (closed at RM12.40 today) is now trading at a PER of 12.4 times (based on the last 4 quarters' EPS of 99.8 sen). BAT has paid out quarterly dividend payment totaling of 98 sen over the past 4 quarters; thus giving a Dividend Yield of 7.9%. Based on the above, BAT is considered fairly attractive for a recovery play.

Technical Outlook

BAT dropped from its high of about RM74.00 in Dec 2014 to a low of RM9.20 in Mar 2020. In the last 12-13 months, the share prices were well-supported at the horizontal line at RM12.20-12.30. 


Chart 1: BAT's monthly chart as at Feb 8, 2022 (Source: isaham.my)

Chart 2: BAT's daily chart as at Feb 8, 2022 (Source: isaham.my)

Conclusion

Based on an improved financial performance, BAT is a good stock for a recovery play. This is notwithstanding its technical outlook remains bearish as the downtrend has yet to be reversed.

Note:
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