by NUR HAZIQAH A MALEK / pic by TMR FILE
THE tobacco business within the nation is structurally dogged by a mismatch between excessive cigarette costs and low disposable incomes, making affordability the actual drawback.
CGS-CIMB Securities Sdn Bhd analyst Kamarul Anwar acknowledged that prison syndicates would proceed to serve the illicit market regardless of roadblocks being positioned as a consequence of persisting demand.
“Malaysians can’t afford authorized cigarettes as they lack the buying energy,” Kamarul wrote in a analysis report on Monday.
He stated Malaysia’s cigarettes are some of the costly on the planet relative to earnings, primarily based on its proprietary evaluation on the ratio of native cigarette costs to minimal wages of assorted nations.
Kamarul was responding following a media report that uncovered “Ben Gang”, which was stated to have a stranglehold on Malaysia’s contraband cigarette market.
He famous when the federal government positioned an embargo on cigarette transhipment at seaports from Jan 1, 2021, onwards to curb smuggling, the syndicate recalibrated its modus operandi, in accordance with the media report.
After smuggling in cigarettes from Vietnam, the merchandise have been moved to barter boats to be traded in worldwide waters.
The cigarettes would then be shifted to fishermen boats earlier than being unloaded at particular seashores, primarily based on the media article.
Kamarul stated the weak buying energy continues to deteriorate amid the Motion Management Order (MCO), with Malaysia’s median earnings sinking 15.6% year-on-year (YoY) to RM2,062 per thirty days in 2020.
“With determined occasions come determined measures; the article revealed that fishermen and vacationer boat homeowners assisted the gang’s smuggling actions to complement their diminishing incomes,” he famous.
CGS-CIMB reiterated a ‘Maintain’ score on British American Tobacco (M) Bhd (BAT) with a dividend low cost model-based goal worth (TP) of RM15.40.
The brokerage agency maintained its monetary 12 months 2021 ahead (FY21F) income projection of RM2.5 billion for BAT, 7.7% larger YoY however a tad shy of FY19’s RM2.51 billion.
Kamarul had not highlighted the cigarette transhipment ban as a doable catalyst for BAT just because this alone couldn’t successfully thwart a multibillion-ringgit prison exercise.
The dealer expects BAT’s gross sales quantity to develop YoY in FY21F because of the perception that extra people who smoke who had kicked the behavior have been lighting up once more throughout the lockdown.
Nonetheless, Kamarul stated this may not be sufficient to push BAT’s gross sales to prior ranges.
“The phenomenon of Malaysians erecting white flags to plead for meals and different provides because the MCO stretches on brings a danger that BAT’s gross sales could not proceed to develop in FY22-23F.
“We nonetheless consider BAT’s catalyst lies within the legalisation of digital cigarettes and vaporisers merchandise,” he stated.
He stated this may not happen in 2021 because the Parliament will solely resume tentatively in September 2021 and there could also be different extra urgent points to be hashed out first.