KUALA LUMPUR (July 27): Hong Leong IB Research has downgraded British American Tobacco (M) Bhd (BAT)with a target price of RM45.55 and said BAT’s 1HFY16 net profit of RM223.4 million came in below expectations, accounting for 29.5% and 28.6% of house and consensus full year estimates.

In a note today, the research house said adjusting for the one-off restructuring expense of RM85.7 million, core profit was still below ours and consensus estimates (40.9% and 39.6%).

It said BAT declared second interim dividend of 45 sen/share bringing year-to-date (YTD) dividends to RM1/share (1H15:RM1.56 sen/share), representing a payout and yield of 128.4% and 1.8%.

“BAT’s domestic, duty free and contract manufacturing volume declined by 28.9% and 39% YTD vs SPLY.

“Downgrade to a Sell from a Hold with target price of RM45.55 based on DCF (WACC: 8.23%; TG 3.0 %),” it said.