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Re: 2018: Interesting year for MOI guess I don't really share your short term expectations that much. Maybe longer term, yes, but not in 2018. I expect a pretty dull year with EPS growth at the low end of their 7-9% guidance, excluding what might happen with tax reform. IQOS might get introduced in 2018 in the US, but it likely will be later in the year, and then only put in a couple introduction markets. It will take time to build awareness and extend national distribution. Therefore even 2019 is unlikely to have significant sales of Heatsticks, and you're probably looking at 2020 or later before it is possibly a real factor. Then you have to realize that in Japan and Korea, PM's cigarette market share was below 25%, which has allowed them to steal significant competitors market share already. In the US, MO's cigarette market share is 50%. That means that IQOS will inevitably cannibalize larger amounts of sales of MO's traditional cigarettes, resulting in little change in sales or profitability. Furthermore, the half of the national cigarette market that MO does not own is skewed toward discount cigarettes, urban areas, minority smokers, and menthol brands due to the popularity of Newport menthol, etc. Will Heatsticks be an easy sell to those markets to take share from competitors? Much more difficult to predict. On taxes, 1) a permanent corporate rate reduction would be great, but it is already partially expected and factored into share prices. 2) Qualified dividends to shareholders already get preferential tax treatment (i.e. taxed the same as long term capital gains), so I see no scenario where that changes for the better in this reform. My guess is it stays unchanged. 3) Repatriation reform would be irrelevant to MO as the only foreign income they have is dividends from BUD, and that is already tax free to them due to them owning over 10% of BUD. In fact, the whole repatriation tax issue largely goes away if the US corporate rate is dropped to 25% or less, because then foreign tax rates and US tax rates would be much more similar. Repatriation taxes are not triggered by bringing money back to the US unless they were earned in countries with a rate lower than the US rate. 4) I don't see tax reform materially changing MO's position on divesting BUD. MO has very little tax basis in their BUD shares which currently have a market value of $24 billion. Yes, a 10% drop in the corporate tax rate (i.e. from 35% to 25%) would save them $2.4 billion in taxes if they ever sold the BUD shares with that lower rate. But even at at 25% rate, selling out BUD would still trigger a $6 billion federal tax bill, and that makes little sense to pay unless there is some great replacement use for the remainder of the BUD money. |
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Msg # | Subject | Author | Recs | Date Posted |
12074 | Re: 2018: Interesting year for MO | mo_strategist | 0 | 9/29/2017 3:23:50 PM |