Even though British American Tobacco (Malaysia) Berhad (KLSE:BAT) is not a large cap stock, its share price has moved significantly on the KLSE in recent months, hitting highs of RM10.04 and lows of RM8.94. Investors may have a better opportunity to enter the stock market and maybe purchase it at a reduced price during certain share price swings. Is the present selling price of RM9.38 for British American Tobacco (Malaysia) Berhad indicative of the small-cap’s true value? Or is it now priced too low, giving us the chance to purchase?
My valuation model currently indicates that the stock appears to be fairly valued. Currently trading at a discount of around 11% to my intrinsic value, purchasing British American Tobacco (Malaysia) Berhad now would entail paying a reasonable price. Furthermore, there isn’t much to gain from mispricing if you think the stock is actually worth MYR10.52. Moreover, the low beta of British American Tobacco (Malaysia) Berhad suggests that the company’s stock is less erratic than the overall market.
When considering a stock purchase, the future outlook is crucial, particularly if you’re an investor hoping to expand your portfolio. It’s usually a smart idea to purchase a strong firm at a low price, therefore let’s also look at the company’s projected future growth. However, British American Tobacco (Malaysia) Berhad’s predicted 4.4% profits growth is not very exciting, which undermines the company’s investment thesis. For the time being at least, growth doesn’t seem to be a major factor in a purchase choice for the organisation.
BAT’s future perspective appears to have already been priced in by the market, as seen by the share price hovering around fair value. But there are other crucial elements that we haven’t covered today, such the company’s financial stability. Since the last time you examined the stock, have these things changed? In the event that the price drops below its actual value, will you still be convinced enough to purchase?
Considering that BAT is currently trading close to its fair value, if you have been watching the stock, this might not be the best moment to purchase. But given the bright future, it would be worthwhile to examine more closely at other aspects, such the soundness of its financial sheet, in order to