Chill88 you are right, bat still pays the best dividend among these top consumer stocks. If there is a chance where the sales goes up, the stock price will too.
The only way to compete with illegal Cig is Cheaper brand and lower Taxes( quite hard to come by) Illegal Cig is Not without cost. Only advantages is Cheaper Labor cost, everythings is the same. Cost of Tobacco leaves, carton box, Bopp film-wrapping, filters & wrapping paper are no much different in Malaysia and Indonesia.
Illegal Cig cost----Shipping cost to Malaysia + local taxes(Indo) + Mal distributors + Invisible Hand Custom Clearance Cost
BAT Cig cost-----production Cost ( including Tobacco leaves ), Distribution Cost + Plus Malaysia Taxes( Big, Big Item )
So if you really look at Cost comparison, BAT has only one way Out---create Cheaper Brand---CUT quality and Sell Cheap (strictly for low-end products----however profit margin for Low-end is not Good......It tends to outstrip BAT Labour Requirement ( another Big Headache )
Yay, dividend is coming. Always good to have a long term good dividend stock despite the not so rosy outlook for the industry during this Covid crisis period. Am still keeping and keeping fingers crossed it will bounce back strong when this crisis is about to end. In the meantime, enjoy the dividend BAT investors and don't look so much at the share price if it brings you down.
I kind understand illegal Cig. market share during MCO----zero. Most of my workers in Port Klang area cannot leave free Trade Zone so they asked my Driver to go around Klang and also KL to buy "cheap Cig"---there is none. 3--4week ago, a Tobacco factory in Nilai started operation again (i heard it belong to politician Fat Lady-------don't think pay any taxes( was closed down 2yrs ago )
Cheap Cig is sell at RM48 / 10 packs now----Buy a pack will cost 5.50++----And this price is Not very Cheap compare to BAT's Rothmans ( haven't find out "actual price" yet )
I think overall BAT profit margin is Hit by " non-tax paying illegal factories in Malaysia & and Illegal Cig from Indo. However things will Change very soon, PN got no money left, illegal Cig factories in Malaysia has to pay taxes-----this will level the playing Field
Based on the Dividend Intrinsic value for BAT, it worth RM18.88 margin of safety 40.57%, Happy investing :)
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Just in BAT's Rothmans price per 20Cig is RM12.40 (cheap brands). However Rothmans was launched in Sept 2017 @ RM12 / 20Cig And BAT was trading At RM37
Sad things was, I found Bangla selling unknown Brand Cig at RM5.0---5.50 ( I am quite sure, it came from Local Manufacturer without paying Taxes )
I asked my worker to try it bcos i am afraid i might get Cancer from it. Taste wise it is Flat, nothing close to BAT Rothmans Brand-----My conclusion remain the same, BAT should create New Brand and Sell Cheap. Local manufacturer of Cheap Brand must have sourced Tobacco leaves from Kelantan area to cut cost------Cannot beat them, just join the Party
BAT is used to make 60% net profit. Ask management to make 10% profit, it very difficult to convince them to even start thinking. Usually main concern is Cheap Brand will cannibalise their Premium Brand market share----But we known it is not true, BAT Premium Brand market share already canniblised by illegal Cig.
Illegal Cig packing is same as BAT, workers shortages are same, Machinery are same, Delivery Van are same----everything is same except Tobacco Leaves. And profit margin is a few hundred percent lower. So why management don't go for extreme cheap brand?------Big Chicken, Don't eat small Rice ( all i can say )
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
EngineeringProfit
20,594 posts
Posted by EngineeringProfit > 2020-06-03 21:30 | Report Abuse
Cheers.....I keep collecting bit by bit too
Later we huat big ya