KUALA LUMPUR: British American Tobacco (M) Bhd’s (BAT) shares climbed in early trade Friday after it reported better-than-expected earnings in the third quarter.

       The tobacco company rose 2.77%, or 40 sen to RM14.84, making it the third top gainer on Bursa Malaysia.

       BAT’s net profit for the third quarter ended Sept 30 (3Q21) rose 23.43% to RM78.68mil from RM63.74mil a year ago.

       Quarterly, however, fell 2.31% to RM613.02mil from RM627.52mil last year.

       It declared a third interim dividend of 26 sen per share, amounting to RM74mil, to be paid out on Nov 25.

       For the first nine months to Sept 30, BAT posted a net profit of RM213.4mil on revenue of RM1.77bil.

       Kenanga Research said despite the FMCO, BAT’s 9MFY21 results beat its expectations, accounting for 85% of its estimate.

       “We believe the positive bump came from the stringent measures in place to combat the illicit tobacco trade.

       “With the reopening of the economy, we expect 4QFY21 to continue to be stellar; thus, we raised our FY21E/FY22E earnings by +10%/+7%,” it said.

       Kenang has reiterated its “outperform” on BAT with a higher target price of RM16.70 from RM15.70 previously.

       TA Securities Research said BAT’s 9MFY21 core earnings of RM219.9mil came in within expectations at 76% and 80% of the house and consensus full-year estimates respectively.

       The research house noted that the level of illicit trade has dropped to 58% from 64% in end-2020 and the legal industry volume has grown 6% year-on-year.

       “We believe the business landscape of legal cigarette players would continue to improve with the lifting of movement restrictions and concerted efforts in clamping down illicit activities.

       “For Budget 2022 which will be announced today, the management hopes the government would include further measures to curb the illicit cigarette market and leave tobacco excise duty status quo. Separately, BAT also advocates for the introduction of a regulated nicotine vape framework,” TA Securities said.

       It has maintained a “buy” call on BAT with an unchanged target price of RM15.70 per share based on an unchanged discounted cash flow valuation.