BAT’s plans may be affected by postponement…


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108 points

PETALING JAYA: The postponement of the excise obligation on digital cigarette’s and vaporiser product’s nicotine-laced liquid and gel may put British American Tobacco Bhd’s (BAT) plans to maneuver into the phase in limbo.

On Jan 3, the Royal Malaysian Customs Division (RMCD) introduced that it might postpone the levy, which was supposed to start on Jan 1, 2022, to a later date.

No cause was given for the delay, however CGS-CIMB Analysis famous that this could possibly be as a result of vape trade gamers’ discontentment over the excise obligation fee.

“Even we were negative on the amount that the government had posited at Budget 2022’s tabling,” it stated, noting that the proposed excise obligation fee of RM1.20/ml was on the excessive facet.

“It may not seem punishing for closed-system vapes or vape pens, as their gel and liquid are highly durable.

“However, the issue comes for the other vape variations that require more gel and liquid than the closed-system type.

“The retail prices of the existing open-system vapes’ liquid bottles can more than double if the RM1.20/ml excise duty is imposed,” it defined.

Nonetheless, this indefinite postponement would place BAT’s plans to distribute vapes in Malaysia in a limbo.

That stated, the delay needs to be impartial for the group’s prospects as CGS-CIMB identified that customers can be fiscally burdened by the proposed excise obligation fee anyway.

“We think that these industry players were not protesting against the excise duty’s imposition. Rather, we believe that they want the industry to be legitimised and regulated – just that the excise duty should not push up the vape liquid’s retail prices to levels that the consumers can ill afford.”

Nevertheless, relatively than merely revising down the excise obligation fee, RMCD is suspending the levy indefinitely.

Based mostly on its conversations with vape trade gamers, the analysis home stated the federal government had mulled taxing vape liquid since at the very least 2015.

It additionally opined that making vapes unaffordable might spawn a complete new black market, identical to the one which has devoured a lot of the cigarette trade in Malaysia.

The analysis home has maintained its “hold” name on BAT with a goal value of RM14.38 a share.

It believes a re-rating catalyst for the inventory would be the authorities’s choice to revise down the excise obligation fee on vape liquid.

It cited draw back dangers to its advice embody extra down-trading to value-for-money cigarettes, and people who smoke slicing down their cigarette consumption as soon as the financial system reopens.


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