British American Tobacco - Second Half Pre-Close Trading Update 2018

[idpickering]

I do not know what is meant by an e-cig shop, but I cannot bring myself to add to my BAT or Imperial Brands at this time, even although I have some funds to invest. I will let them do their own thing and see what happens.

Dod

I tend to agree with you Dod, but I must admit to being tempted to buy another slice of BATS as my monthly HYP top up? "Buy when others are fearful" and all that. Shell RDSB are in the frame too.

Ian.

[Dod101]

Fundamentally if you feel the dividend is safe, why not? BAT's yield is higher than Shell and there seems no reason why they should not increase it when they announce their results for 2018 so there is your argument for topping up BAT, but I just cannot bring myself to do so. On the face of it though, it is a no brainer although I am not recommending that!

Dod

[Arborbridge]

I do not know what is meant by an e-cig shop, but I cannot bring myself to add to my BAT or Imperial Brands at this time, even although I have some funds to invest. I will let them do their own thing and see what happens.

Dod

There are shops selling e-cigs springing up all over ("vape" shops) - you must seen them? However, it's a bit irrelevant since big tobacco was never into retailing - the important point was about control of the process of production on the chemical side. Is there a barrier to entry as there is with conventional cigarettes, and if so can BATs/IMB exploit it? - or will some chemical or drug based industrial group move in?

Arb.

[Dod101]

OK. being a non smoker I am being dim. Yes, around where I live these 'vape' shops seem to come and go although I see a lot of people smoking vape type cigs, which does not fill me full of joy as a shareholder in big tobacco. For the time being this is surely a side issue as far as BAT are concerned. Their problem seems to be in the US where, rightly or wrongly they increased their presence recently.

See how their results pan out but I cannot bring myself to buy into what appears to be either an industry in terminal decline (at least as we know it) or undergoing massive change which is highly dangerous.

Dod

[idpickering]

Fundamentally if you feel the dividend is safe, why not? BAT's yield is higher than Shell and there seems no reason why they should not increase it when they announce their results for 2018 so there is your argument for topping up BAT, but I just cannot bring myself to do so. On the face of it though, it is a no brainer although I am not recommending that!

Dod

Thanks for your ever-welcome input Dod. My other thought was to top up where I’m in negative territory on the capital returns front. Direct line was my thinking there, but I remind myself it’s all about the income. I have more faith in BATS though too.

Ian.

[idpickering]

This from TMF;

Will FTSE 100 income champ British American Tobacco thrive in 2019?

Last year, one FTSE 100 stock performed significantly worse than every other index constituent, sliding 46% throughout the 12-month period, underperforming the broader index by 37.2% when including dividends.

Unfortunately, for shareholders of British American Tobacco (LSE: BATS) this performance wiped out a decade of market-beating gains.

Heading into 2018, the stock had outperformed the FTSE 100 over the previous decade by a high single-digit percentage on an annualised basis. Now, after losing nearly 50% of its value in just 12 months, over the past 10 years, holders have seen a total return of 7.7% per annum, compared to 8.8% for the FTSE 100, an underperformance of 1.1% a year.

The question is, why did British American slump in 2018 and will this trend continue or reverse in 2019?

https://www.fool.co.uk/investing/2019/0 ... e-in-2019/

[monabri]

The increase in debt from their acquisition of Reynolds needs to be covered by their cash flow from operations ( BATS). Perhaps analysts looking long term ( US markets- mentholated products, regulation generally) are coming to the conclusion that BATS will not be able to cover the debt from operating cash flow, therefore a possible divi cut lies ahead? If so, one can understand that the share price has fallen...but I'd reckon by too much. There are 2 elements to the fall , the debt increase combined with general market falls. I reckon / guess there will be some sp recovery but limited (15-20% ?) .. I dont see £50 per share .

In the case of IMB, they are covering their debt comfortably from operations. Earnings are expected to grow over the next 3 years window ( BATS are expected to fall). I personally like IMB more than BATS as I reckon their divi is more secure, likely to increase.

Just an opinion.

[Wizard]

I do not know what is meant by an e-cig shop, but I cannot bring myself to add to my BAT or Imperial Brands at this time, even although I have some funds to invest. I will let them do their own thing and see what happens.

Dod

There are shops selling e-cigs springing up all over ("vape" shops) - you must seen them? However, it's a bit irrelevant since big tobacco was never into retailing - the important point was about control of the process of production on the chemical side. Is there a barrier to entry as there is with conventional cigarettes, and if so can BATs/IMB exploit it? - or will some chemical or drug based industrial group move in?

Arb.

I don't get how these niche retailers are viable. Can't recall any shops a few years ago selljng nothing but conventional cigarettes, so why is a shop dedicated to just e-cigarettes viable? I am a non smoker, so happy to concede that this view is from a position of ignorance.
So like others my interest is in the control of the product upstream. I hold IMB, but not BATS, and think they own an ecigarette brand called Blu (or similar), so am always happy when I see this stocked by any convenience retailer I occassionally go in to. I think IMB have, up until now, made a bigger push in to ecigarettes than BATS, is that right?

Terry.

[monabri]

BATS made a Next Generation Products (NGP) presentation - 17/11/16.

http://www.bat.com/group/sites/uk__9ztf ... t&QS1=2016

Broadly, 4 main areas for the NGPs by the looks of it.

(1) Heated Tobacco - Glo (Neosticks) ...I think that Glo is the branding and Neosticks are the consumables. As it is heated tobacco, it is most closely akin to smoking tobacco.

(2) Hybrid - iFuse (Neopods) Tobacco & eLiquid. The eliquid adds flavours but yet you have the tobacco present

(3) Closed Vapour - ePen2 , Pebble, Vype Gen 2, Voke

(4) Open Vapour - eliquids,

The latter 2 systems don't appear to contain tobacco and are described as meeting customer need for "performance" ( I guess the nicotine hit), customisation (tweaking the amount of nicotine delivered ..?) and "Flavour exploration".




Imperial have their Blu (myBlu) range - I don;t know how much longer they will get away with the packaging!

https://www.blu.com/en/GB


Also, for IMB - they say in the link above "Heated tobacco is a smaller NGP category but one that is growing, most notably in parts of Asia. We have plans to launch Pulze, a heated tobacco product, in 2019."

[monabri]

A little more on Imperial - here's some of the background.

https://www.vapetrotter.com/news/hon-li ... r-of-vape/

Imperial Tobacco bought Hon Lik’s patents in 2014 for $75 million

[Arborbridge]

I don't know how big the vaping moat will be, but we can only hope that these companies will use their industrial and marketing muscle to burn off the opposition. If not, we are in a slow decline situation - I suspect that decline will be long enough to see me six feet under.

As for vape shops, I think it's a fad that will pass. I cannot see the current rash of them lasting against supermarket competition for very long: it is a commodity. The shops can only exist as long as people believe it's a clubby thing to do.

Arb.

[Breelander]

As for vape shops, I think it's a fad that will pass. I cannot see the current rash of them lasting against supermarket competition for very long...

This one has be going, online and in the high street, for 10 years...
https://www.totallywicked-eliquid.co.uk/stores

[ADrunkenMarcus]

British American Tobacco's share price sagged somewhat in December 1930, too. Investors were worried about the dividend, according to a 15 December 1930 newspaper report I have. People were also selling Unilever - big mistake!

Best wishes

Mark.

[PinkDalek]

As for vape shops, I think it's a fad that will pass. I cannot see the current rash of them lasting against supermarket competition for very long...

This one has be going, online and in the high street, for 10 years...
https://www.totallywicked-eliquid.co.uk/stores

Latest announced group turnover £48.0 million from https://beta.companieshouse.gov.uk/comp ... ng-history ...

[Arborbridge]

As for vape shops, I think it's a fad that will pass. I cannot see the current rash of them lasting against supermarket competition for very long...

This one has be going, online and in the high street, for 10 years...
https://www.totallywicked-eliquid.co.uk/stores

Latest announced group turnover £48.0 million from https://beta.companieshouse.gov.uk/comp ... ng-history ...

As I said, a passing fad....

[Wizard]

Coincidentally have just read this on the BBC, which makes me seriously wonder about getting out of IMB, they may have missed the boat...

https://www.bbc.co.uk/news/business-46654063

The firm now claims some 70% of the US e-cigarette market, putting it on track to make what some analysts estimate will be well over $2bn in sales this year...

Juul also sells in seven countries outside the US, including the UK, Germany and France.

Altria's deal to take a 35% stake in Juul, valued the firm at more than $38bn - more than double the $16bn valuation settled on during its most recent financing round in July.

The deal made Juul's two co-founders billionaires, according to Forbes. It also put their three-year-old start-up on a par with the market cap of publicly listed companies such as Ford and Delta Airlines.

Terry.

[ADrunkenMarcus]

How about marijuana?

Best wishes

Mark.

[OLTB]

How about marijuana?

Best wishes

Mark.

There has to be a better way of coping with the drop in share price.

Cheers, OLTB.

[idpickering]

How about marijuana?

Best wishes

Mark.

There has to be a better way of coping with the drop in share price.

Cheers, OLTB.

I cope by buying more BATS shares on the cheap!

Ian.

[monabri]

Coincidentally have just read this on the BBC, which makes me seriously wonder about getting out of IMB, they may have missed the boat...

https://www.bbc.co.uk/news/business-46654063

The firm now claims some 70% of the US e-cigarette market, putting it on track to make what some analysts estimate will be well over $2bn in sales this year...

Juul also sells in seven countries outside the US, including the UK, Germany and France.

Altria's deal to take a 35% stake in Juul, valued the firm at more than $38bn - more than double the $16bn valuation settled on during its most recent financing round in July.

The deal made Juul's two co-founders billionaires, according to Forbes. It also put their three-year-old start-up on a par with the market cap of publicly listed companies such as Ford and Delta Airlines.

Terry.

Isn't this simply a case of Altria having to pay well over the odds for a technology where both IMB and BATS have established brands?

How do these companies(Juul ) get round US patent laws acquired by IMB? I se they are claiming their own parents.. interesting to see if they get challenged by IMB in the future.

https://www.juul.co.uk/intellectual-property-list