Swedish Match: Strong Smokefree Beneficiary On Sale At 18.6x P/E
(Preview) Company Update (SWMA SS) (Buy)
Summary
Swedish Match shares have started falling again, despite last week's end of the U.S. "nicotine tax" proposal, its biggest tail risk.
This is an opportunity to buy one of the stocks benefiting the most from the shift from cigarettes to Reduced Risk Products at just 18.6x P/E.
Recent news has been positive: peers point to a favourable market; a rising USD adds to EBIT; Omicron is not a threat to Swedish Match.
The recent correction is just part of the stock's volatility; it went through multiple 15%+ corrections in the last 5 years as it rose 138%.
With shares at SEK 68.68, we expect a total return of 84% (23.0% annualized) by 2024 year end. The Dividend Yield is 2.2%. Buy.
Introduction
We review our investment case on Swedish Match (referred here as "SWMA") after shares started falling again this week, despite the removal of what was SWMA's biggest tail risk, a proposed U.S. "nicotine tax". The proposal was abandoned late last Thursday (December 9), and SWMA stock first rose 7.8% in t…