AmResearch is maintaining its Hold on BRITISH AMERICAN TOBACCO (M) [] Bhd (BAT) but with a higher DCF-based fair value of RM44.30/share (previously RM42.00/share), as it rolls over its valuation base year from FY10F to FY11F.
The Government had quietly raised excise duty on tobacco by 15.8%, or an additional 3sen/stick. This brings the total excise duty from 19sen/stick to 22 sen/stick effective Oct 1, 2010.
“As expected, no reprieve was given as in the previous years. The Government’s latest move is reminiscent to that of last year, in which it unexpectedly raised excise duty on tobacco products ahead of the annual Budget. We do not expect another hike in the upcoming Budget on Oct 15,” it said.
AmResearch said the quantum of increase at three sen/stick was above its expectations. It had only anticipated a hike of up to two sen/stick, given the challenging tobacco business operating environment.
In 2007 and 2008, the Government imposed a punitive hike of 3sen/stick, but toned it down with a symbolic one sen/stick increase in 2009.
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