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Prices & Quotes - UK Markets - Imperial Brands (IMB)

Risk Warning The value of investments can fall as well as rise and any income from them is not guaranteed and you may get back less than you invested. Past performance is not a guide to future performance.

Share Price:
Down 1,292.50p
Change Today:
-7.50p
Market Cap:
12,232m
Sector:
Tobacco

Morgan Stanley says British American Tobacco's ability to grow is underappreciated

By Alexander Bueso

Date: Wednesday 02 Sep 2020

LONDON (ShareCast) - (Sharecast News) - Morgan Stanley reiterated its 'overweight' stance on shares of British American Tobacco, telling clients that the company's ability to offset the ongoing decline in the ranks of smokers and a potential ban in the US on flavours was going underappreciated.
Indeed, the firm's user base had grown from about 143m in 2017 to approximately 146m by 2019 and might reach roughly 155m by 2030.

"We see a significant opportunity in BAT's new model, just as the shares and investor interest hit multi-year lows," they said.

Key to their thesis was the firm's shift under chief executive officer, Jack Bowles, from a combustibles business to a nicotine play.

Management's ambition was to have 50m non-combustible users by 2030, up from 11m at the end of 2019, which would more than compensate for the falling number of smokers.

The broker also highlighted the 50:50 split in BAT's volumes between emerging and developed markets, strong management, best-in-class track record for share gains - 200 basis points globally since 2014 - and anticipated stable earnings growth of 4-8% over 2020-25.

Its analysts also argued that the dividend payout was "largely secure" as the company refinanced debt.

Furthermore, the improved position in US next-generation-products should provide a "safety net" in case Washington moves to ban menthols and allow it to capture users migrating to other products.

Indeed, they expected the company's return on invested capital to improve by 250 basis points by 2025.

As well, using Smoore International as a benchmark and then applying a 67% discount due to the lower profitability, BAT's combustibles operations were valued only marginally above those of Imperial Brands.

"So why is it trading at IMB valuations? The key risk to the equity story is clearly the threat to profits if the US bans flavours, but we see insulation as better positioning in NGP helps add subscribers in Europe and the US.

"We see an attractive opportunity to move into the best overall Nicotine portfolio in Europe. We are OW BAT and UW IMB."

Morgan Stanley did nevertheless trim its target price for BAT's shares from 3,380.0p to 3,330.0p.

Note 1: Prices and trades are provided by Digital Look Corporate Solutions and are delayed by at least 15 minutes.

 

IMB Market Data

Currency UK Pounds
Price 1,292.50p
Change Today -7.50p
52 Week High 2,045.50p
52 Week Low 1,246.00p
Volume 102,161
Shares Issued 946.41m
Market Cap 12,232m

Performance Indicators

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What The Brokers Say

Strong Buy 15
Buy 0
Neutral 3
Sell 0
Strong Sell 0
Total 18
strong_buy
Broker recommendations should not be taken as investment advice, and are provided by the authorised brokers listed on this page.

IMB Dividends

  Latest Previous
  4th Interim 3rd Interim
Ex-Div 20-Feb-20 21-Nov-19
Paid 31-Mar-20 31-Dec-19
Amount 72.01p 72.00p

Trades for 27-Oct-2020

Time Volume / Share Price
08:48 37 @ 1,292.50p
08:48 43 @ 1,292.50p
08:47 460 @ 1,292.00p
08:46 39 @ 1,290.50p
08:46 38 @ 1,290.50p

IMB Key Personnel

CFO Oliver Tant
Chair Therese Esperdy
CEO Stefan Bomhard