BAT Kenya stock market woes.

A subsidiary of British American Tobacco, BAT Kenya has a rich heritage in Kenya dating back to 1907. With support from the parent company, BAT Kenya has grown into a behemoth with a market cap of KES 35 billion, as of 2024-06-21.

After a pre-dividend rally to a high of KES 451, the stock is yet to see brighter days. The current price, as of 2024-06-21, of KES 352 is quite a head scratcher; especially after the announcement of plans to build manufacturing plants and an overall good year.

Investors seem to lack confidence in the company's future, a harsh regulatory environment and the decline of the tobacco industry appear to be a some of the contributing factors. After encountering regulatory hurdles with their latest product Velo, investors deem this industry a tough one and hence believe that investing in BAT isn't such a good idea.

However there might still be an opportunity for BAT Kenya; their bread and butter business of tobacco is on the decline but as Issac Newton said "for every action there is an equal and opposite re-action". Although smoking has been on a decline for decades now, there's been a shift; younger people and die-hard smokers are opting for vapes rather than traditional cigarettes.

Vaping is a new way of smoking, vapes are simply fun e-cigarettes with bubbly flavors like watermelon and macaroon, just to name a few. This market has been growing tremendously in recent years and isn't showing signs of slowing down, BAT Kenya is well positioned to take advantage of this. Their size and century-long experience gives them an advantage over other players; they'll certainly have to change and their progressive image will have change-doubters thinking twice.

Their parent company has been leading the charge with regard to new product categories, BAT Kenya however hasn't yet started distributing some of these products like the vapes as aforementioned in the region.

Crispin Achola, the firm's current CEO is a veteran in the business, having joined the company in 1999. He understands the business really well after working in different capacities across the continent(Africa). His expertise coupled with new & fresh ideas from pioneers in the vaping space, can better position BAT Kenya as a leader in the space.

Conclusion

They are a pretty innovative company and integrate technology into their business to improve efficiency and lower costs, this makes it hard to write them off. They're also an important business for the economy of the country(Kenya), their manufacturing plants export product and bring foreign exchange(dollars) into the country. Some investors might be underestimating the lengths to which the government is willing to go to ensure that businesses like BAT Kenya are afloat.

With a latest historical yield of 14.1%, the current stock price is a post-dividend price and it'll probably start rallying back up to the low 400s towards the end of the year. Although investor confidence is fairly low in the future of BAT Kenya, the company still has an opportunity to adapt and stay relevant in the marketplace; vapes is one way of growing the business by reaching a new and younger consumer. Nonetheless, the clock is ticking...

Resources

BAT Kenya , New product categories , Nairobi Securities Exchange