Hon­ing in on the va­p­ing trend

Finweek English Edition - - MARKETPLACE HOUSE VIEW - edi­to­rial@fin­week.co.za By Mox­ima Gama

Bri­tish Amer­i­can Tobacco (BAT), which owns brands in­clud­ing Dun­hill, Lucky Strike and Kent, re­cently re­ported rev­enue growth of 10.2% in the first nine months of the year to end Septem­ber. The vol­umes of cig­a­rettes sold in­creased in a num­ber of mar­kets, no­tably Ukraine, Bangladesh, Rus­sia, Viet­nam and Turkey. It re­ported de­clines in Pak­istan, Brazil and Venezuela. Over­all, vol­umes were up 2.2% to 497bn cig­a­rettes over the pe­riod.

The group is aim­ing to be­come the largest listed tobacco busi­ness with the takeover of Reynolds Amer­i­can, cur­rently the sec­ond-largest cig­a­rette seller in the US. BAT al­ready owns a 42% stake in Reynolds, and is widely ex­pected to in­crease its ini­tial $47bn buy­out of­fer for the re­main­der of the busi­ness in or­der to gain board ap­proval for the deal. The trans­ac­tion would give BAT a strong foothold in the US and ac­cess to Reynolds’ lead­ing e-cig­a­rette po­si­tion, Bloomberg re­ported.

BAT has been in­vest­ing ag­gres­sively in al­ter­na­tive tobacco prod­ucts, and launched a new e-cig­a­rette, named the Vype Pebble, on 1 De­cem­ber with a re­tail store in Mi­lan. The tobacco group be­lieves the Pebble, which is brightly coloured and er­gonom­i­cally shaped, fills a gap in the mar­ket as e-cig­a­rettes, which have fewer neg­a­tive health ef­fects, are cur­rently ei­ther shaped like tra­di­tional cig­a­rettes or are bulky with “tanks” that can be re­filled, Reuters re­ported. BAT has spent about $700m over the past five years to de­velop its al­ter­na­tive tobacco prod­ucts.

Over the past four years, sales of vapour de­vices grew by 59% to more than $6bn, with sales in the US more than dou­bling, ac­cord­ing to data from Euromon­i­tor In­ter­na­tional. How to trade it: As BAT fell to pre­vi­ous lows from Oc­to­ber, the three-day rel­a­tive strength in­dex (RSI) formed higher bot­toms – a sign of grad­ual in­vestor in­ter­est. How­ever, BAT would have to trade above 79 400c/share to es­cape its bear trend and retest highs at 94 100c/ share. In­vestors could reload above 89 500c/share but should main­tain a tight stop-loss at first, and keep it trail­ing. Do not go long if BAT re­verses be­low 74 400c/share – the bear trend would then re­main in­tact.

Over the past four 59%years, sales of vapour de­vices grew by 59% to more than $6bn, with sales in the US more than dou­bling.

A pro­moter shows Bri­tish Amer­i­can Tobacco’s new tobacco heat­ing sys­tem de­vice ‘glo’ and a packet of Kent tobacco.

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