Swedish Match: No U.S. Cigars IPO (For Now), Still Doubling Potential

(Preview) Company Update (SWMA SS) (Buy)

Summary

• Swedish Match stock fell 7% in Stockholm on Tuesday morning, after preparations for the U.S. Cigars IPO were suspended indefinitely.

• The suspension was due to the FDA denying the Substantive Equivalence designation for about 3% of the company's cigars (by volume).

• The products are likely flavored cigars. They remain on sale, it would take years for the FDA to stop them and they may not succeed.

• Flavored cigars are likely less than 10% of group EBIT. Group EBIT would have still grown 13.6% in 2021 even had U.S. Cigars EBIT stayed flat.

• With shares at SEK 68.00, even on reduced forecasts, we expect a total return of 102% (21.2% annualized) by 2025 year-end. Buy

Introduction

Swedish Match AB ("SWMA") stock fell by as much as 8% in early trading in Stockholm this morning (March 15), before recovering slightly to SEK 68, 18% below its 52-week high.

The decline was triggered by the announcement the day before that SWMA has suspended preparations for the IPO of its U.S. Cigars business inde…