BAT cigarette price hike

BAT is one of those stocks which is time tested and recession proof.  People will still buy cigarettes, and are fairly loyal to their brand.  But at what price?   At first loyalty for the product is fine, but eventually some time down the road people will look for a cheaper alternative.  Brand to brand, BAT has a stable of loyal cigarette consumers.

But how about legal to illegal cigarettes?  The growth of illegal cigarettes is astounding, but I think analysts put too much emphasis on the dire straits of the industry in its war against illicit cigarettes.  Most of the cigarettes are imported from lower tax countries such as Indonesia.  The neighbouring countries will also eventually raise their cigarette tax eventually along with places in Asia.  In fact, almost all the "low" tax regions have raised their taxes in October.

So how about the price hike of RM 1.50 a pack.  This is quite a large hike, but it is rather in line with previous rate hikes.  It's not the largest we've seen.  I expect BAT to actually reap rewards as they raise prices with  higher profit margins.  Lower revenue is a given, but shareholder returns are still viable on margins.