Loss to date: 17.7%

Orig­i­nal en­try point: Buy at £38.33, 27 April 2017


OUR BULLISH CALL on Im­pe­rial Brands (IMB) may be 17.7% in the red, but we’re stay­ing pos­i­tive on the tobacco multi­na­tional for its re­silient earn­ings and ro­bust cash flows, which stem from strong brands such as David­off, Gauloises Blondes and JPS cig­a­rettes and Mon­te­cristo cigars.

Sen­ti­ment to­wards the £30.25bn cap is presently poor. In­vestors are fret­ting over reg­u­la­tory changes in the US and a rel­a­tive lack of pres­ence in cer­tain Next Gen­er­a­tion Prod­uct (NGP) seg­ments.

But our en­thu­si­asm has been re­in­forced by re­search from In­vestec Se­cu­ri­ties. The bro­ker is a buyer with a £43.60 price tar­get which im­plies 38.2% up­side for one of its top con­sumer sta­ples picks.

Im­pe­rial’s pre-close trad­ing up­date (28 Sep) con­firmed the tobacco titan is on track to meet full year ex­pec­ta­tions and is gear­ing up for new NGP launches in full year 2018.

In­vestec be­lieves ‘these will re­main fo­cused on e-vapour and the blu brand, but the com­pany could yet sur­prise with launches in other ar­eas. We think Im­pe­rial, if it so wished, could launch a heat­not-burn prod­uct within one year and at an eas­ily man­age­able cost.’

Im­pe­rial is re­bound­ing from sev­eral weaker years as it mi­grated smok­ers to fewer, stronger brands.

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