KUALA LUMUR (Oct 2): Guiness Anchor Bhd (GAB), British American Tobacco (BAT) and JT International Bhd (JTI) fell amid speculations that the sin sector will be hit with higher taxes in Budget 2014.

The Budget will be tabled in Parliament on Oct 25.

At 2.56 pm, GAB was down 8 sen or 0.5% at RM17.10 after falling 18 sen or 1% in morning trades. However, its trading volume was low at 2,900 shares.

BAT fell 20 sen or 0.3% to RM64 on 21,300 shares at 3 pm while JTI fell one sen or 0.15% RM6.47 with trades of 34,200 shares.

In morning trades, GAB was one of the top ten losers.

The stock, with strong fundamentals, has always been steady due to its high dividend pay-out. GAB declared a final dividend of 49 sen per share recently.

But for tobacco companies BAT and JTI, a higher excise duty was slapped on them before the Budget.  

Earlier this week, both raised the selling price of their 20-stick cigarette packs by RM1.50 per pack, in response to a 14% excise duty hike by the government.

Although this increase of RM1.50 per pack more than offset the impact of excise duty, a price hike may have an impact on their sales.

But the impact on sales may be greater on JTI, compared to BAT as the latter caters more for the premium market.

More than 50% of JTI’s revenue is derived from the value-for-money segment. This compares to BAT’s revenue of more than 70% generated from the less price-sensitive premium segment, said CIMB.

Due to the price hike, Alliance Research raised rating for BAT to “neutral” from sell, and upped its target price to RM60.66 (from RM54.72), as the impact of the excise duty hike was less severe than initially anticipated.

BAT share rose yesterday after an initial fall.

But CIMB Investment Bank Research has cut the FY13-15 earnings forecasts by 1-4% for JT International Bhd after the RM1.50 raise.

The research house said JTI remains a ‘neutral’ with a 30 sen or 4% lower target price of RM6.70 based on the dividend discount model.

CIMB IB research head Terence Wong said: “We expect JTI to register a steeper sales volume decline than British American Tobacco, although we expect total industry volume to decline as smokers resort to illicit cigarettes,” he said.

JTI’s earnings will come under pressure from the excise duty hike but the share price will be supported by the decent dividend yield, he added.