Good discussion, one of the best risk/rewards in large cap developed markets. Has been my largest position for more than a year, weighted north of 16% & looking to ramp to ~20-25%. Yes there are downside risks, but comparing the true FCF generation of the business, even with a wider range of outcomes than say MO & PM, I struggle to see how you return an 5-10 year IRR
If I recall, the reason for only selling off a 4% stake in the Indian tobacco company is that they get certain veto rights and a say in decision making as long as they have at least a 25% stake. So the sale let's them bring in cash at a high valuation but doesn't materially affect their involvement and rights in a meaningful way.
ESG provides mispricing in the market. In the long term, stocks are still a weighing maching. The question is whether BTI is marked below value or not.
Highly undervalued. IMO It is ridiculous that the politician fighting agains smoking so much! Alcohol is much worse for your liver and health.... Current Dividend shield is now 10% I keep buying more.
Concerning the ban of off-brand vaping products: BAT works together with regulators and has to balance a fine line in order to keep market shares while doing so - this is why progress is somewhat slow. The current approach is to select individual brands and revoke there license for being a consumer product/ prevent them from obtaining a license in the first place. The danger to BAT is that the most effective way would probably be a ban of the technology, which would put BAT PM etc out of business too ... that's why they lobby for vape remaining a smoking alternative (thus medically relevant to the countries interests) while having individual "cotton candy kids bars" labeled as individual infringements rather than a whole market problem. You are both probably right though, momentum will build, though it has to also be supported by the BAT product to actually compete with the off brand stuff, which as of today it doesn't always do (specifically in terms of pricing and quality, both probably improving with scale).
Regarding the tax implications for the sale of ITC, couldn't BAT use their recent write-down of their tangible book value as an offset to their capital gains on the sale of ITC?
