EVEN if the intention is noble, the Health Ministry’s all-out move to ban smoking with its “generation end-game” quest is bound to backfire given its poor track record in combating illicit cigarette trade and smuggling for years.
Instead, a more effective way – if the Government is serious about getting Malaysians to kick the smoking habit – is to embrace vaping as a smoking cessation tool as advocated by think tank Datametrics Research and Information Centre (DARE).
Citing various research from academics and health agencies such as the University of Queensland and Public Health England, DARE’s managing director Pankaj Kumar highlighted that vaping is 95% less harmful than cigarettes because “people smoke for the nicotine but they die from the tar.”
Hence, Pankaj said vape liquid’s excise duty should make up a lower share of its retail price compared with cigarettes’ (which stands at 46-67%).
“He viewed the Government’s ‘generation end game’ plan to be infeasible given how the authorities have not been able to stump the black market for years,” CGS-CIMB Research analyst Kamarul Anwar pointed out in a company update on British American Tobacco Malaysia Bhd.
For the record, the CGS-CIMB Securities Conference Call Series had on Jan 26 hosted a session entitled “Demystifying Malaysia’s Vape Industry” which featured the Malaysian Vape Industry Advocacy (MVIA) president Rizani Zakaria and DARE’s Pankaj.
The one-hour session covered all grounds on vaporiser products – from the characteristics of vapes to the industry’s market value and the challenges that lie ahead.
Speaking at the 150th session of the World Health Organization’s (WHO) executive board meeting in Geneva recently, Health Minister Khairy Jamaluddin said the country plans to outlaw smoking for the next generation by prohibiting the sale of cigarettes and tobacco products to people born after 2005.
He further expects the legislation which would bring about a “generation end-game to smoking” to be passed this year.
Malaysia is effectively follows New Zealand’s recent move in banning the sale of tobacco to anyone born after 2008 (people born after 2008 will never be able to legally buy cigarettes in their lifetime).
The generation end-game agenda coupled with the Government’s insistence to stick to the RM1.20/ml vape excise duty rate has cast dark clouds over the prospect of BAT Malaysia, prompting CGS-CIMB Research to reiterate its “reduce” stance on the cigarette manufacturer with an unchanged DDM (dividend discount model)-based target price of RM10.44.
“We have seen how high excise duties have pulverised the cigarette market, and we worry that the Government will repeat the cycle with vapes,” justified the research house.
“As we forecast BAT Malaysia’s dividends to continue to dwindle with more down-trading to cheaper cigarettes, we retain our ‘reduce’ call. The upside risks are that the Government rescinds its generation end-game proposal and dials down the vape liquid excise duty.”
At the same CGS-CIMB event, MVIA’s Rizani said the non-governmental organisation (NGO) and the vaping fraternity are lobbying for the Finance Ministry to reconsider a lower vape liquid excise duty to the 40 sen/ml level from the RM1.20/ml level proposed under Budget 2022 which is more than 100% of the retail value of 1ml of vape liquid.
However, Finance Minister Tengku Datuk Seri Zafrul Aziz has indicated in the Jan 10-16 edition of The Edge Weekly that the ministry is sticking to the RM1.20/ml vape excise duty rate once the Health Ministry is ready to regulate the vape industry.
At the close of last Friday’s (Feb 4) trading, BAT Malaysia was unchanged at RM12.40 with 75,400 shares traded, hence valuing the company at RM3.54 bil. – Feb 7, 2022
