What do you think of the scale of volume declines in US (-10%), UK (two years of down mid-teens) and Australia -25%? The commentary around Australia seems to suggest that price hikes (excise) are driving greater adoption of illicit cigs/vapes. Are you comfortable with multiple years of high single digit/low double digit volume declines in these markets?
Imperial has done a great job of controlling costs and managing its portfolio. Relative pricing remains strong, and the affordability in the US still provides a long runway. I worry little - especially when, if we are focusing on declines, shares outstanding are outracing cig volumes.
Thanks Devin! The current shareholder return is about 14-15% (dividend £1.3B + buyback £1.1B / market cap £16.7B). Even if their earnings were to stay flat or slightly decrease IMO this would be an undervalued stock. If they manage to hit their guidance (mid-single digit adjusted operating profit growth) then this is severely undervalued.
That's correct, but I forgot to add that I am already thinking about the buybacks starting around 2026 for which I thinks will be in the ballpark of around 4bn p.a.
Your EBIT assumptions are also incredibly conservative. The cig business should be able to grow ebit alone. Then you have tailwinds from ngp flipping negative to positive. ERP tailwinds in fy25 and beyond. Look at BAT savings when they did similar. It’s material
Yeah - I'm not one to try for precision. All models are simply illustrations to show potential futures, and I quite like painting with a conservative brush. You are quite right on the ERP tailwind - something similar setting up at STG as well.
Great write up
Buybacks are way to underpreciated also at MO and BAT, which I hope stays this way for longer
Thanks, Hermann. I agree - though I would argue that Imperial's program is the most sustainable even though it is also the largest on a % basis!
What do you think of the scale of volume declines in US (-10%), UK (two years of down mid-teens) and Australia -25%? The commentary around Australia seems to suggest that price hikes (excise) are driving greater adoption of illicit cigs/vapes. Are you comfortable with multiple years of high single digit/low double digit volume declines in these markets?
Imperial has done a great job of controlling costs and managing its portfolio. Relative pricing remains strong, and the affordability in the US still provides a long runway. I worry little - especially when, if we are focusing on declines, shares outstanding are outracing cig volumes.
Thanks Devin! The current shareholder return is about 14-15% (dividend £1.3B + buyback £1.1B / market cap £16.7B). Even if their earnings were to stay flat or slightly decrease IMO this would be an undervalued stock. If they manage to hit their guidance (mid-single digit adjusted operating profit growth) then this is severely undervalued.
That lines up with my thinking. Thanks, Tian!
That's correct, but I forgot to add that I am already thinking about the buybacks starting around 2026 for which I thinks will be in the ballpark of around 4bn p.a.
Would euqal a buyback yield currently of about 7,5% + dividend yield about 9,5%...
Great deal 🤝
Looks like Devin’s account was taken over by scammers?
Was an imposter account that used my profile pic. I was unplugged (away on my honeymoon) but was able to deal with it. Nothing to worry about!
Congratulations Devin! I wish you the best.
Thank you!
Unfortunately
Hope he fixes it quickly
Was an imposter account that used my profile pic. I was unplugged (away on my honeymoon) but was able to deal with it. Nothing to worry about!
Do you know how we can report this to Substack?
Nothing new?
At least the spam comments have been deleted.
Unfortunately not
Your EBIT assumptions are also incredibly conservative. The cig business should be able to grow ebit alone. Then you have tailwinds from ngp flipping negative to positive. ERP tailwinds in fy25 and beyond. Look at BAT savings when they did similar. It’s material
Yeah - I'm not one to try for precision. All models are simply illustrations to show potential futures, and I quite like painting with a conservative brush. You are quite right on the ERP tailwind - something similar setting up at STG as well.