Excel – http://1drv.ms/1ieWpFw
– Market Timing
– EY%: Buy below 6.12, sell above 7.18
– 5Y DCF: 6.43 – 7.38; 5Y RDCF: 1% growth rate
– Recently, JTINTER dropped from 6.6 to 6.25 which is quite close to 6.18 (EY%)
– Based on analysts’ consensus, JTINTER’s net cash may hit MYR1/share in FY15. JTINTER has, in the past, paid dividends of 15 to 75sen/share when its net cash reached MYR1/share. Its latest net cash stood at 43.8sen/share at end- Dec 2013.
– Analysts expect industry sales volume to contract by 6% in 2014 and 2015 respectively following the recent 14% hike in selling prices. Besides, JTINTER management expects operating environment to remain extremely challenging, primarily due to the hike in excise duty and cigarette prices. In addition, consumption is expected to be impacted by continued inflationary pressures and weak consumer sentiment.
– JTINTER is one of the most defensive stocks in my equity holdings.
– JTINTER had received a conditional takeover offer from JT International Holding BV (JTIH), a wholly-owned subsidiary of Japan Tobacco Inc, to acquire the remaining 39.6% stake or 103.6m shares it does not already own in JTI at RM7.80/share, a 20% premium to its pre-suspension price of RM6.50. JTIH currently holds 60.4% of the share capital of JTI. In making the offer, it does not intend to maintain the listing status of JTI. Other major shareholders of JTI include the Employees Provident Fund (8.13%) and Kumpulan Wang Persaraan (6.84%). (Apr 2014)
– JTI’s business is still very cash generative and investors could undoubtedly hold out for higher dividends – the company tends to pay out special dividends whenever its cash/share hits MYR1. Nevertheless, this is expected to happen only in FY16. Current yields, meanwhile, are about fair at 3.4%.
– Based on my valuation, this is a great deal. I think the takeover offer is a fantastic opportunity to exit this sunset industry.
Latest Financial – Annual Report 2013 (2 Apr 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1583333
At the time of writing, I owned shares of JTINTER.