By Ying Xian Wong
Shares of British American Tobacco (Malaysia) Bhd. fell early Tuesday, after weak first-quarter earnings led analysts to cast doubt on its outlook.
Shares fell by as much as 5.9% and were last trading at 10.28 ringgit, down 5.0% on the day and 20% over the past year.
BAT late Monday said its net profit in the first quarter fell 23% on year to MYR40.3 million ($8.8 million) from MYR52.3 million a year earlier, mainly due to lower sales volume caused by increase in vape usage, a persistent tobacco black market and the start of the Ramadan fasting month. Quarterly revenue was 25% lower on year to MYR390.2 million.
Hong Leong Investment Bank downgraded BAT's rating to hold from buy and cut the target price to MYR10.86 from MYR12.35, citing regulatory uncertainty on e-cigarettes as weighing.
As the tobacco control bill that regulates the sale of nicotine vaping products hasn't yet passed, BAT may decide to launch its vaping products only after there is clear and thorough regulation, analyst Sam Jun Kit said in a note.
Kenanga Investment Bank also cut BAT's target price, to MYR10.00 from MYR12.00, but it maintained a market perform rating. The black market remains the industry's largest near-term headwind, when combined with the ongoing inflationary pressure, BAT may experience even lower sales, analyst Jack Lai Yuan Khai said in a note.
Write to Ying Xian Wong at yingxian.wong@wsj.com
