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Tobacco has never been a really popular sector so PE's and Divi's have always looked reasonably attractive. More ethical investors have been steering clear for a long time but I have noticed growing regulatory pressure on financial firms and where they invest their customers money.
https://www.fca.org.uk/news/speeches/building-trust-sustainable-investments
Tobacco wouldn't be high on the list of 'sustainable investments' and thus market forces could be being interfered with. I don't know for sure but I'd imagine large with profits funds and other such arrangements have been tweaking holdings over the last year to satisfy regulators in this regard, buying clean energy and sustainability contributory holdings and letting go of stocks that have less clean reputations. My theory has paid off in terms of the switch I've made to these areas with Impax Environmental and iShares Global Clean Energy but I've not been able to resist some cash generative, high yielding stocks such as IMB that seem to have fallen too far to add a different dynamic to my portfolio.
It's my own view but I thought I'd share this insight.
CSDI
As you know I was in both IMB and BATS. With recent upturn in BATS I've taken a nice little profit, but would happily go in and out again pre ex divi if price movement goes my way. Don't think IMB will give me that opportunity but happy hold at current levels.
Have a good weekend
Hi JR
It does not help us does it ?
In one version the divi is well covered, and in the other barely covered.
Anyway I am sure fags will remain popular for some time yet and maybe moreso in the developing nations rather than the socalled richer nations like UK LOL.
When we get back to travel again there will be increase in volume from the Airport/Duty Frees (I hope).
Happy to have biggest chunk of my SIPP split between IMB & BATS - the divi looks distinctly unsound so I am counting on the yield dropping for both as SP increases, esp as IMB already cut by 1/3 LY.
Cheers & GL mate
CSDI
Good morning.
In simple terms we are both correct. I have used diluted earnings per share of 254.4 and yourself basic earnings per share of 158.3.
Analysts use both - not sure why
Reported EPS 158.3 in RNS for 2020 Accounts:
Financial Performance
· Business overcame the challenges posed by COVID-19; securing the safety and wellbeing of employees and responding to changes in consumer behaviour
· Tobacco volumes strong but sub-optimal product and market mix result in weak gross profit contribution
· A more disciplined approach in NGP reduced H2 losses after a disappointing H1
· Strengthened Executive Team with key external leadership appointments providing fresh skills and perspectives to complement existing experience
· Comprehensive strategic review underway with a capital markets update scheduled for 27 January
· Completed sale of Premium Cigars business on 29 October 2020; proceeds used to reduce debt
· Group net revenue up +0.8%
· Tobacco volume decline of -2.1% reflecting better market size and share trends in several markets
· Tobacco net revenue +1.8% but weaker mix impacting gross profit contribution
· Moderation of NGP net revenue decline; H1: -43%, H2: -9% with FY down 27%
· Adjusted EPS down -5.6% reflecting reduced tobacco profit with COVID-19 and regulatory costs; and losses in NGP
· Reported EPS up 49.4% at 158.3p reflecting prior year impairment charge for Premium Cigar sale
· Strong cash conversion 127%; 107% excluding timing benefit on duty payments
· Annual dividend of 137.7 pence per share reflecting rebased payment announced in May
CDSI
Based on EPS of 254.4 p/e at opening this morning is 5.4.
On current price of 1390 amended to 5.46 - ridiculously low.
If only we all knew that.
The risk/reward is clearly better now, 3 yrs after my first purchase at £29 when the divi was around 6% and the P/E was around 12.
It baffles me how this share remains so under-valued, but the market does what the market does best ... remains irrational in lots of areas.
The catch is - it is in a horrific bear trend and we do not know when that will end.
and When it does end ... the Trend will be our friend (again)
The other catch is the P/E ratio shows as 8.6 on LSE, but 5.4 on Sharecast. Difference of 50% based on different P/E models.
so divi not as well covered under the different models of calculation !!
TBH - This was pointed out to me by the knowledgable Toff-Appleton a few months ago
P/E below 6
10% dividend which is covered 1.8
Apart from smoking becoming more and more unpopular in the West, this seems very undervalued.