Stock Name: JTINTER
Company Name: JT INTERNATIONAL BHD
Research House: INTER PACIFIC
JT International Bhd
(Aug 13, RM5.65)
Maintain outperform at RM5.60 with target price RM6.20: We reiterate 'outperform' with our target price at RM6.20 based on our discounted cash flow valuation with weighted average cost of capital of 8%. We continue to like JTI given its (i) growing market share; (ii) resilient quality, cash nature of its business; (iii) zero gearing; and (iv) high dividend yield of 5.4%. However, our key concerns are: (i) expectation of higher excise duty in the upcoming Budget 2011; and (ii) enforcement will remain a challenge with higher illicit trade and contraband.
JTI's annualised 1HFY10 net profit of RM71.3 million surpassed both our estimates and consensus, which accounted by 57.4% and 60% respectively. As expected, JTI declared a first interim dividend of 15 sen per share during the quarter under review. This is on track to meet our full year gross dividend per share estimate of 30 sen per share which translates to a yield of 5.4%.
In 2QFY2010, net profit swelled by 12% year-on-year on the back of a 3.3% y-o-y increase in revenue to RM298.5 million, mainly attributed to improved sales volume driven by its value-for-money (VFM) Winston label, which expanded its market share by 1.2 percentage points to 10.7%, and higher excise-led price increase led by JTI's lower marketing and operating expenditure. Adding on, the earnings before interest, tax, depreciation and amortisation (Ebitda) margin was up 0.5 percentage points 16.2% y-o-y from 15.7% in 2QFY2009. However on a q-o-q basis, both net profit and revenue slipped by 11.1% and 4.7% respectively, mainly due to lower sales volume and higher marketing expenditure.
JTI reported that overall tobacco industry volume contracted by 1.1% y-o-y in 1HFY2010. Decline in total industry volume was due to the continued moderate growth of illicit trade from 38.7% in August 2009 to 37.1% by end-2009. However, JTI's market share was elevated to 19.6% in 1HFY2010 from 18.4% in 1HFY2009. We note that Winston's continued growth further strengthened JTI's position in the VFM segment, previously dominated by rival British American Tobacco's Pall Mall. Also, given the recent post-excise hike, it saw consumers' downgrading from the premium segment to the VFM segment. ' Inter-Pacific Research, Aug 13
This article appeared in The Edge Financial Daily, August 16, 2010.
Company Name: JT INTERNATIONAL BHD
Research House: INTER PACIFIC
JT International Bhd
(Aug 13, RM5.65)
Maintain outperform at RM5.60 with target price RM6.20: We reiterate 'outperform' with our target price at RM6.20 based on our discounted cash flow valuation with weighted average cost of capital of 8%. We continue to like JTI given its (i) growing market share; (ii) resilient quality, cash nature of its business; (iii) zero gearing; and (iv) high dividend yield of 5.4%. However, our key concerns are: (i) expectation of higher excise duty in the upcoming Budget 2011; and (ii) enforcement will remain a challenge with higher illicit trade and contraband.
JTI's annualised 1HFY10 net profit of RM71.3 million surpassed both our estimates and consensus, which accounted by 57.4% and 60% respectively. As expected, JTI declared a first interim dividend of 15 sen per share during the quarter under review. This is on track to meet our full year gross dividend per share estimate of 30 sen per share which translates to a yield of 5.4%.
In 2QFY2010, net profit swelled by 12% year-on-year on the back of a 3.3% y-o-y increase in revenue to RM298.5 million, mainly attributed to improved sales volume driven by its value-for-money (VFM) Winston label, which expanded its market share by 1.2 percentage points to 10.7%, and higher excise-led price increase led by JTI's lower marketing and operating expenditure. Adding on, the earnings before interest, tax, depreciation and amortisation (Ebitda) margin was up 0.5 percentage points 16.2% y-o-y from 15.7% in 2QFY2009. However on a q-o-q basis, both net profit and revenue slipped by 11.1% and 4.7% respectively, mainly due to lower sales volume and higher marketing expenditure.
JTI reported that overall tobacco industry volume contracted by 1.1% y-o-y in 1HFY2010. Decline in total industry volume was due to the continued moderate growth of illicit trade from 38.7% in August 2009 to 37.1% by end-2009. However, JTI's market share was elevated to 19.6% in 1HFY2010 from 18.4% in 1HFY2009. We note that Winston's continued growth further strengthened JTI's position in the VFM segment, previously dominated by rival British American Tobacco's Pall Mall. Also, given the recent post-excise hike, it saw consumers' downgrading from the premium segment to the VFM segment. ' Inter-Pacific Research, Aug 13
This article appeared in The Edge Financial Daily, August 16, 2010.
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