I agree that Imperial and BAT do look impressive. I do believe, STG does as well. The current FCF yield, I would argue, is not normal, when considering Special Items and other reinvestment, which can add several hundred million DKK. I think it's also important to be mindful that while these are all tobacco companies, STG has a radically different product portfolio and geographic footprint relative to the majors. There is no hiding from the fact that EB MRC is a major headwind for STG right now, but the inputs would suggest that the growth rates of GEs, namely NGO, have an opportunity to far exceed what's expressed.
I think not that the traditional cigarette majors like IMB or BAT are the peer group. Yes Scandinavian does rolling tobacco. Bugler in the US or Break in Germany. But that s not the main business of the company.
Pipe tobacco, machine made cigars (cigarillos) and cigars aim not at the chain cigarette smoker.
From the numbers it seems to me that cigars are not in the same downward spin like traditional cigarettes in the US. So i think there is a place for STG besides the cigarette majors in a portfolio.
Of course, but what return expactions do you want. I dont buy stocks for diworsification reasons. I want return. And as my calculations imb and bats will have better returns for now. ?
By definition, the maximum potential return would involve concentrating down into one position - and then using leverage! Regardless of how skewed the r/r looks, such approaches are likely to lead to ruin. Diversification is not diworsification if it keeps you alive. We must respect uncertainty.
My gut is mixed. For one, their leverage ratio, relative to normalized earnings, had previously suggested that either additional M&A or a more aggressive capital return policy was likely. However, the increased reinvestment rate into growth enablers, layered on top of the ERP rollout, will continue to weigh on cash flows. This acquisition seems a tad aggressive, though the brands acquired are quite impressive, and the price tag isn't exactly demanding; especially if there is a good chunk of synergies to recognize. While a smaller % of the acquired, Ace pouches are popular - especially for those gravitating towards very strong varieties.
Marcet Cap 8.26B DKK
FCF 2024 0.9B DKK
= 10.9% FCF Yield + 2% Sales Growth = 12.9% p.a.
Not really impressive valuations in comparison with IMB or Bats.
I agree that Imperial and BAT do look impressive. I do believe, STG does as well. The current FCF yield, I would argue, is not normal, when considering Special Items and other reinvestment, which can add several hundred million DKK. I think it's also important to be mindful that while these are all tobacco companies, STG has a radically different product portfolio and geographic footprint relative to the majors. There is no hiding from the fact that EB MRC is a major headwind for STG right now, but the inputs would suggest that the growth rates of GEs, namely NGO, have an opportunity to far exceed what's expressed.
I think not that the traditional cigarette majors like IMB or BAT are the peer group. Yes Scandinavian does rolling tobacco. Bugler in the US or Break in Germany. But that s not the main business of the company.
Pipe tobacco, machine made cigars (cigarillos) and cigars aim not at the chain cigarette smoker.
From the numbers it seems to me that cigars are not in the same downward spin like traditional cigarettes in the US. So i think there is a place for STG besides the cigarette majors in a portfolio.
Of course, but what return expactions do you want. I dont buy stocks for diworsification reasons. I want return. And as my calculations imb and bats will have better returns for now. ?
Where does one draw the line?
By definition, the maximum potential return would involve concentrating down into one position - and then using leverage! Regardless of how skewed the r/r looks, such approaches are likely to lead to ruin. Diversification is not diworsification if it keeps you alive. We must respect uncertainty.
Hi Devin. Curious to hear your thoughts on today’s announcement by STG? Thank you in advance.
My gut is mixed. For one, their leverage ratio, relative to normalized earnings, had previously suggested that either additional M&A or a more aggressive capital return policy was likely. However, the increased reinvestment rate into growth enablers, layered on top of the ERP rollout, will continue to weigh on cash flows. This acquisition seems a tad aggressive, though the brands acquired are quite impressive, and the price tag isn't exactly demanding; especially if there is a good chunk of synergies to recognize. While a smaller % of the acquired, Ace pouches are popular - especially for those gravitating towards very strong varieties.