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BATS "Incoming...Big Profits"Hello, Below is a quote from an article that explains why we have seen BATS price climb. Vaccine development "In April, BAT announced that its biotech subsidiary, Kentucky BioProcessing (KBP), was developing a potential vaccine for COVID-19. Since then, we have been completing preclinical testing and are pleased to report the potential vaccine has been shown to produce a positive immune response. As such, the vaccine candidate is now poised to progress to the next stage which will be Phase 1 human clinical trials pending FDA authorization. We have committed funds to conduct these clinical trials, which could start as early as late June, pending the responses from relevant health bodies. We have also invested in additional equipment to boost our manufacturing capabilities should they be needed. We have submitted our Pre-Investigative New Drug package to the U.S. FDA who have acknowledged its submission whilst our correspondence with other government agencies around the world continues. We are hopeful to receive further feedback in the coming weeks". Good Luck Cheers!
LSE:BATSLong
by keifer
Value Investment - BATS - Defensive StockAll comments and likes are very appreciated. _________________________________________________________________________________________________________________ Fair Value and Profit Drivers Our fair value estimate for BAT’s ADRs is £46, which implies 2020 multiples of 15 times earnings, 12 times EV/EBITDA, a free cash flow yield of over 6%, and a dividend yield of 4%. These are roughly in line with historical valuations and are sandwiched between those of Philip Morris International, BAT’s closest comparable with slightly higher implied multiples, and Imperial Brands. This is appropriate, in our view, because it reflects the companies' relative positioning in the heated tobacco category. The key underpinnings of our valuation are the pricing power of the combustible business and the sustainability of operating margins. We assume a midcycle organic sales growth rate of 2%, below our 4% benchmark assumptions for consumer staples but roughly in line with that of Philip Morris. The growth rate is driven entirely by pricing power, boosted by BAT's wide economic moat. We forecast an annual volume decline of over 2% on average over the next five years, with price/mix of 5%, a touch below the levels of recent years. On an adjusted basis, and excluding equity income, we forecast a normalized EBIT margin of 43%. This is 5 percentage points above the margin achieved in 2018, boosted by the integration of and synergies from the higher-margin Reynolds business (it achieved a 45% EBIT margin in its final year of independence) and in line with our assumption for Philip Morris International. BAT has guided to synergies of $400 million per year within three years by management, and from BAT’s own cost-efficiency efforts. We assume a stage II EBI growth rate of 3.5% and a discount rate of 7.4%. ________________________________________________________________________________________________________________ There were few surprises in British American Tobacco's preliminary 2019 results, with volume and revenue roughly in line with our forecasts, although operating profit was a little light. We are reiterating our GBX 4,500 fair value estimate and wide moat rating. The stock is materially undervalued in our opinion, and we think the market is pricing in too pessimistic a scenario, but the realization of the upside to our fair value estimate may depend on an improvement in total nicotine volume trends, a factor that these results show remains uncertain. BAT's revenue grew 5.7% on a reported basis and by a similar amount on a constant currency, adjusted basis, slightly above our forecast. The modest beat was entirely due to strong price/mix, with volume in line with our expectations. Our expectations were not particularly ambitious, however, and we would like to see stabilization in the 4.4% decline in full year tobacco volume. Developed markets are the drag, with volume in both the U.S. and the Europe and North Africa segments down 6% in 2019. By category, combustibles declined at a rate slightly faster than 6% in both regions, mitigated by double-digit volume growth in vapour and triple-digit growth in modern oral and heated tobacco. These categories remain too small to move the needle in the top line, however, and the group volume decline of 4.4% is below BAT's recent historical average, and implies a contraction in the nicotine market as a whole. A continuation of that trend is what we think is being priced into the stock. The critical issue for investors is whether volumes can normalize. At present, very strong price/mix (of 10% in 2019) is supporting revenue and earnings growth, but we worry that sustained pricing at this level will eventually lead to increased price elasticity and slow revenue growth. Our valuation assumes a growth algorithm that is more balanced between volume and pricing. Business Strategy and Outlook The advent of e-cigarettes has created the most significant change in the industry since the 1960s. Early forms of e-cigarettes have existed for a generation, but with the consumer arguably less brand-loyal and more aware of health issues than ever before, the industry is on the cusp of a seismic shift to next-generation products. It seems likely that conventional tobacco will remain the driving force of the industry profit pool for at least the next decade, but Big Tobacco manufacturers are nevertheless placing their bets on the new categories most likely to win share of smokers. To date, British American Tobacco probably has the most hedged position across the emerging categories. Its Vype brand has gained some traction in the U.K., while the acquisition of Reynolds gives it access to Vuse. The company's total 2018 research and development spending of GBP 105 million is well below the $383 million (GBP 295 million) spent by PMI last year, and the $2 billion (GBP 1.6 billion) of capital expenditures its rival invested in its heated tobacco facility in Bologna, Italy. In heated tobacco, BAT's Glo has taken tobacco market share of around 5% in Japan in 2018, although it lags PMI's iQOS. We believe heated tobacco is the category most likely to successfully attract smokers, but we do not regard the first-mover advantage as being sustainable in the long term, and it is possible that BAT will regain share through next generation products over time. BAT has doubled down on the combustible business with its acquisition of Reynolds American. We see Reynolds as an incredibly strong asset in a market with plenty of remaining potential for raising prices, and we view the deal positively from a strategic standpoint. The Newport brand is experiencing volume declines at a much slower rate than the rest of the U.S. industry and retains very strong pricing power in the midsingle digits. Nevertheless, it is this aquisition and the increased exposure to the menthol category that is a key reason for the recent weakness in BAT's stock, and the overhang of potential menthol regulation is not likely to ease in the short term. I and/or others I advise hold a material investment in the issuer's securities. _________________________________________________________________________________________________________________ All comments and likes are very appreciated. Best Regards, I0_USD_of_Warren_Buffet
LSE:BATSLong
by I0_USD_of_Warren_Buffett
Breakout Test and Bounce!!This is going to be a bit long but bear with me. The overall directional bias for this trade is extracted from the Monthly analysis. Since August we have been having closes above the monthly tenkan zone (52000-53000). This is significant,especially in October when the candle dipped down but quickly came up again to close above 53000. The narrative here is that are bulls defending this zone,in fact they are not only defending the zone but are also pursing further bullish interests,shown by the strong November candle. Our main aim with this stock is to ride those bulls and piggy bank on that bullish momentum. The 1st price magnet would be the 60000 zone. This zone was a prior high in April so we expect a slowdown in momentum here. If and when price breaks through this zone and tests it with bullish momentum ,then we take the 2nd part of the trade with target the 70000 zone which is the monthly kijun area. Now to our 1st trade,this is being taken on the daily. We had a breakout of the blue shaded are towards the end of November. This zone was tested yesterday and today price seems to be confirming rejection from that zone: Entry: 56 904 SL: 55 520 ( just below the lowest point) TP: 59 908 ( Just slightly below the 60k price) NB: Analysis is just that, analysis,what puts your trade in motion and keeps you trading is risk management. Manage your positions and you live to trade another day.!!
JSE:BTILong
by taftrader