British American Tobacco Analysis
Profile
British American Tobacco Kenya Ltd (British American Tobacco Kenya Limited) is a Kenya-based company.
The Company is engaged in the manufacture and sale of cigarettes and tobacco.
The Company manufactures and sells cigarettes to distributors and fellow subsidiaries of the ultimate parent company.
Its parent company is British American Tobacco plc.
News
BAT has been on the news lately and not for the good reasons. A British television programme called Panorama linked BAT Kenya with bribery. EABL group relations director resigned after she was extensively named in the BAT-Kenya bribery claims in the program.
As mentioned in our previous commentary the full extent of the impact of the claims made in Panorama have not yet been established and may take some time. If it goes against them, their parent company will likely be fined.
BAT plc mentioned that they do not tolerate corruption in their business regardless of where it happens.
Financials
For the six months ended 30 June 2015, British American Tobacco Kenya revenues increased 2% to KES10.55B.
Net income increased 8% to KES1.94B.
Revenues reflect Gross Turnover increase of 3% to KES17.35B.
Net income benefited from Operating Expenses decrease of 1% to KES7.58B (expense).
Dividend per share remained flat at KES3.50.
Basic Earnings per Share excluding Extraordinary Items increased from KES17.93 to KES19.41.
Peer Analysis
Management Effectiveness
| Company | Country | Return on average assets (TTM) | Return on average assets (5 yr average) | Return on Investment (TTM) | Return on Investment (5yr average) |
| BAT Kenya | Kenya | 25.60 | 37.13 | 49.31 | 37.13 |
| Karelia Tobacco Company Inc. S.A | Greece | 14.67 | 16.18 | 19.02 | 16.18 |
| Philip Morris (Pakistan) Ltd | Pakistan | -6.26 | -7.57 | -28.19 | -7.57 |
| Philip Morris CR. a.s | Czech Republic | 21.65 | 27.81 | 37.30 | 27.81 |
| VST Industries Limited | India | 15.53 | 44.49 | 32.13 | 44.49 |
Top 10 Shareholders
- •MOLENSTEEGH INVEST BV. – 60.00%
- •STANDARD CHARTERED KENYA NOMINEES LTD, A/C KE18993 – 8.95%
- •STANDARD CHARTERED NOMINEES NON-RESD. A/C 9866 – 2.48%
- •STANDARD CHARTERED NOM A/C KE11916 – 1.34%
- •STANDARD CHARTERED NOMINEES NON-RED. A/C KE8723 – 1.32%
- •CFC STANBIC NOMINEES LIMITED A/C NR00304 – 1.19%
- •KENYA COMMERCIAL BANK NOMINEES LIMITED A/C 915A – 0.96%
- •KENYA COMMERCIAL BANK NOMINEES LIMITED A/C 915B – 0.73%
- •KENYA REINSURANCE CORPORATION LIMITED – 0.70%
- •STANDARD CHARTERED NOMINEES RED A/C KE11443 – 0.63%
Kenyan WallStreet took an extra step and dug deeper and came up with a list of top institutional shareholders. Source of this information is credited to Factset Research Systems Inc. Data sought was from the period between 31 Dec 2014 – 31 Oct 2015.
| Top Institutional Holder | Shares | % Held |
| Wasatch Advisors, Inc. as of 30 June 2015 | 1.34M | 1.34% |
| LGM Investments Ltd. As of 31 Dec 2014 | 1.32M | 1.32% |
| JPMorgan Asset Management (UK) Ltd. As of 30 June 2015 | 1.14M | 1.14% |
| Aberdeen Asset Managers Ltd. As of 30 September 2015 | 0.475M | 0.48% |
| BI Asset Management Fondsmæglerselskab A/S As of 30 September 2015 | 0.327M | 0.33% |
| Imara Asset Management (Pvt) Ltd. As of 30 April 2015 | 0.293M | 0.27% |
| Coronation Asset Management (Pty) Ltd. As of 31 March 2015 | 0.273M | 0.27% |
| Danske Bank A/S (Invt Mgmt) As of 30 July 2015 | 0.225M | 0.23% |
| Sanlam Investment Management (Pty) Ltd. As of 30 June 2015 | 0.153M | 0.15% |
| Russell Investments Ltd. As of 31 March 2015 | 0.142M | 0.14 |
Share Price
BAT Kenya has a total of 100 million shares. Free floating shares are 40 million or rather 40%, this is due to the fact that the top shareholder (MOLENSTEEGH INVEST BV.) holds 60%.
Fun Facts
Only two companies on the NSE have constantly maintained positive FCFF between 2004 and 2014 i.e. BAT and Nation Media Group.
If you had invested in BAT Kenya in 1995 and sold your shares in 2015. 20 years later, you would have a phenomenal 500% return on your investment.
Assuming you bought 100 shares the price in 1995 was KES 130.00 per share and sold in 2015 at KES 780.00 per share you would have a return of KES 65,000.00.
If you bought 100,000 shares in 1995 at KES 130.00 per share and sold in 2015 at KES 780.00 per share you would have a return of KES 65 Million. Amazing isn’t it?
Share Price Performance 2015
BAT closed at KES 780.00 on Friday December 4th 2015, 16.42% above the 52 week low of 670.00 set on Apr 16, 2015. However, BAT has been down 13.33% YTD as shown in the chart below.
Commentary
BAT Kenya is a solid business. It has a PE ratio of 18.331. It has an interest coverage of 17.91 times. Its average 5 year dividend payout ratio is 99.29. Average dividend growth rate for the past 5 years is 23.57.
That being said BAT Kenya is a company which an investor who wishes to enjoy a steady stream of dividends will definitely want to have it in their portfolio.
Kenyan Wallstreet thinks that the company has a credible management and has been doing a good job. Your thoughts?