British American Tobacco Remains Undervalued

Following the recent court case against the tobacco industry in Canada, equity analysts retain BAT's fair value estimate of £37.50

Philip Gorham 10 June, 2015 | 11:47AM

The Quebec superior court has awarded punitive damages to former smokers against British American Tobacco (BATS), Philip Morris International (PM), and Japan Tobacco (2914) on the grounds that tobacco manufacturers concealed the risk of smoking. Litigation like this is not new, and neither is the award's magnitude. Last year, the widow of a former smoker in Florida was awarded $23.6 billion in damages from Reynolds American Tobacco, a judgment that is currently being appealed.

We believe the size of the damages will be lowered 

Large awards such as this, both in the tobacco industry and outside, are often revised significantly downward during the appeals process. The Engle class action suit, which awarded $145 billion in punitive damages against the industry in 2000, was decertified and the award set aside in 2006.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
British American Tobacco PLC2,902.50 GBX0.09
Japan Tobacco Inc1,955.00 JPY0.18
Philip Morris International Inc74.31 USD1.10

About Author

Philip Gorham  

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