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British American Tobacco Uganda

On the Global front: The Framework Convention for Tobacco Control (FCTC) welcomed an era of global tobacco regulations. FCTC proposed tax measures, graphic pictorials and restricted advertisement to curtail the health effects of smoking. Subsequent to the ratification of FCTC in 2005, global consumption volumes were on a steady decline by an average of 2.6% between 2008 and 2015. However, tobacco companies acted fast to cushion their revenue by increasing retail prices, the effect of which was an increase in retail value by an average of 40% in a similar period. Investment in innovative technology has picked pace to assure consumers of better and lesser risk products. Additionally, to maintain and gain market power, Mergers and Acquisitions (M&A) activity has led to industry consolidation mostly controlled by a few tobacco companies including BAT Plc, Phillip Morris, China National Tobacco Company, Imperial Tobacco and Japan Tobacco. These five globally control approximately 83% of volumes consumed globally.

East Africa tobacco market: In East Africa, some of these global companies dominate tobacco markets (above 75% market share) through their subsidiaries; BAT Plc through BATK in Kenya and BATU in Uganda and Japan Tobacco through TCC in Tanzania. We are UNDERWEIGHT on the East African tobacco market, with a 3-Yr revenue CAGR ranging 0.0% - 1.2%.

Uganda: Uganda’s Tobacco Control Act 2015 has some provisions that are stricter than the Kenyan set, like the complete ban of innovative products like smokeless cigarettes and e-cigarettes. The World Health Organization (WHO) has observed that Uganda is very active in enforcement of tobacco laws. By 2025, Uganda is estimated to have cut consumption by 38% (meeting the globally agreed 30% cut) compared to Kenya’s 21.4% and Tanzania’s 18.7%. We have therefore valued BATU at UGX 1,609.48, a SELL recommendation with a 94.6% downside against the current market price of UGX 30,00