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2012 Report on the future of Philip Morris in Asia

2012 Report on the future of Philip Morris in Asia

Translation: Growth = Death and Suffering inflicted for profit – Never mind the kids they are our future.

  • Asia Remains PM’s Key Growth Driver In 2012 And BeyondBased on an in-depth, bottom up analysis that we performed late last year, we continue to believe PM’s business in Asia is the company’s most valuable asset and is potentially worth $75B or $42 per share. We continue to expect PM’s profits in Asia could double to $10B by 2020. We maintain our Outperform rating on PM shares and it remains our top stock pick for 2012. Please see our original, detailed report on Asia published on 12/16/11 which includes an analysis of key fundamental drivers for each market in Asia, including demographics, economic growth, regulatory trends, cigarette price and consumption trends, and social attitudes toward cigarette consumption.
  • Individual Country Models Suggest Significant Growth Opportunity – We’ve updated our initial country P&L’s for PM’s top 5 markets in Asia and have included them in this report.
  • Indonesia Will Likely Drive The Majority Of PM’s Asian Growth – Our analysis suggests Indonesia is PM’s top market opportunity, as a combination of favorable demographics, economic fundamentals and competitive dynamics should allow PM’s profits in Indonesia to almost quadruple to $5.2 billion by 2020, at that point representing more than 50% of PM’s total Asia segment OCI. We feel Indonesia’s potential earnings power is misunderstood by the market.
  • Japan Is Highly Profitable, But Has Limited Growth Prospects – Japan has long been among the most profitable cigarette markets in the world. We estimate that Japan represented about 46% of PM’s Asia segment profit in 2011, with approximately 57% margin. Although comps will likely be challenging in 2012, we expect OCI to modestly increase, aided by a stronger yen.
  • China Could Be A Game Changer For PM – The real upside potential for PM in China lies in the company’s opportunity to exploit potential strategic alternatives for CNTC. We think of China as a call option on the stock.
  • The Philippines, Korea, And Australia Are Important Markets – Opportunity in the Philippines’ and Korea stems from the movement toward premium products. Australia is likely a challenging, but profitable market.

Download PDF : 2012 PM Asia Business – A Land of Opportunity

Download PDF : 2012 PM Asia In-Depth Analysis Detailed Report

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