This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Trade Parameters
Technical Observations – For
Technical Observations – Against
Bullish breakout above February highs, after July consolidations. Recent GBP weakness, induced by Brexit worries, is helping international companies with significant FX exposure. Company’s products (tobacco is non-cyclical, defensive) are considered resistant to recent global trade war fears. Recent sale of stake in Logista tobacco company is allowing Imperial Brands to reduce net debt. Attractive 6.32% forward dividend yield. Company’s strength lies in new organic brand-building strategy after years of acquisitions and product launches, according to broker Liberum.
Risks to Imperial Brands shares include poor FY results in November or a profits warning after a trading update; FX headwinds from strengthening GBP; a sustained market rally that creates a preference for riskier stocks (e.g. Banks & Financials) and lower than expected adoption of e-cigarettes and new tobacco products.
Brokers are overwhelmingly positive on Imperial Brands, with 95% of analysts saying either “Buy” or “Hold”, with only 1 advocating to “Sell”. Bullish outlook is further supported by 65% of brokers seeing a share price upside, with a medium-term target price of 3201p, in line with our goal of revisiting January highs. The bullish breakout may induce the neutral brokers to upgrade their recommendations and/or price targets.
Next Event: Ex-Dividend, 23 Aug; FY Results, 6 Nov
Latest Broker 12-Month Consensus: 55% Buy, 40% Hold, 5% Sell (full breakdown on request)
Source: DowJones Newswires, Reuters News, Bloomberg or Company Press releases
| Share | 1wk | 1m | 3m | 6m | 1yr | 2yr | 3yr | 4yr | 5yr |
| Perf % | 2.4 | 2.3 | 13.0 | 10.2 | -9.2 | -26.3 | -11.8 | 19.1 | 38.7 |
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Prepared by Michael van Dulken, Head of Research