British American Tobacco (M) Bhd (BAT), for instance, has seen more than RM12 billion of its market value disappear since 2014, The Malaysian Reserve (TMR) reported.
BAT and other cigarette manufacturers have complained that steep excise duties and the availability of illicit cigarettes are affecting them badly.
Illicit cigarettes are sold for between RM3 and RM5 a pack while the price of legal cigarettes has risen from RM5 in the early 2000s to between RM11.50 and RM17 a pack presently.
BAT’s net profit for the financial year ended Dec 31, 2017, plunged to RM479.69 million from RM732.07 million posted a year earlier, while yearly revenue declined to RM3 billion from RM3.76 billion previously, TMR reported.
TMR said the share price of the cigarette giant, which traded at a five-year high of RM72.65 on Sept 12, 2014, yesterday traded at RM28.04. It said over the past year, BAT had lost about RM5.9 billion in market value. At its peak in 2014, its 285.53 million shares had valued BAT at around RM21 billion.
According to TMR, the drop is unusual as the smoking rate among Malaysians is still very high, at 43%.
It is perhaps no wonder that BAT disposed of its manufacturing facility in Petaling Jaya last year to cut costs.
According to Philip Morris (M) Sdn Bhd, the 40% hike on cigarette taxes in November 2015 caused many smokers to turn to illicit cigarettes which are cheaper. Since 2011, the report added, cigarette taxes had jumped by 110%.
It said illegal cigarette consumption reached a record high of 57.1%, or 10 billion sticks out of the 18 billion sticks consumed nationwide in December 2016.
Investors are shifting to other fast-moving consumer goods. The Employees Provident Fund (EPF), for instance, has been slowly disposing of its stake in BAT.
BAT’s main shareholders are BAT with a 50% stake, Standard Life Aberdeen Plc with 5.01%, EPF with 5.01%, JP Morgan Chase & Co at 4.07% and Lazard Ltd at 3.86%, according to Bloomberg data.
The EPF has reduced its direct interest from a high of 23.41 million shares in June 2015 to 14.32 million shares as at March 1, 2018. It said in 2016 that it planned to dispose of its stake in BAT at the right price.
TMR quoted Affin Hwang Investment Bank Bhd senior director and head of equity capital markets Arvin Chia as saying there appeared little chance of recovery for BAT.
“There doesn’t seem to be any near-term catalyst to spur the stock. Demand-wise globally, people are moving away from tobacco, while governments – not just Malaysia – are going to continue to raise excise duties. This will continue to drive lower-end consumers towards illicit cigarettes.”