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Phillip Morris (PM; A2/A-/A neg) 6.6Y FV

CONSUMER STAPLES
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IPT +135 vs. FV +105, preferred curve remains BAT

  • This is a 6.6Y (that's been rounded down). 7-month longer August line trades at Z+113/€84, our FV is 8bps inside it. For comparison BAT gives ~12bps roll-down here.
  • PM has ~no US exposure & was former international arm of Altria that was spun-off in 2008. It records 5% revenues in Americas but includes Argentina & Mexico. Russia is 7-8% of EPS.
  • It has the highest expected near term growth (FY/CY24 at +4.8% in net revenues & +6.6% in adj. operating income) - part of that is from its high exposure to higher growth non-combustibles (below).
  • Our preferred curve remains BAT in this tenor on better carry & roll balanced with good geographical diversification & reasonable non-combustibles exposure. New BAT32s which we had a screen cheap on has done poorly; 40bp loss on +19bps carry & -59bps spread return - latter saw secondary curve reprice wider.

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IPT +135 vs. FV +105, preferred curve remains BAT

  • This is a 6.6Y (that's been rounded down). 7-month longer August line trades at Z+113/€84, our FV is 8bps inside it. For comparison BAT gives ~12bps roll-down here.
  • PM has ~no US exposure & was former international arm of Altria that was spun-off in 2008. It records 5% revenues in Americas but includes Argentina & Mexico. Russia is 7-8% of EPS.
  • It has the highest expected near term growth (FY/CY24 at +4.8% in net revenues & +6.6% in adj. operating income) - part of that is from its high exposure to higher growth non-combustibles (below).
  • Our preferred curve remains BAT in this tenor on better carry & roll balanced with good geographical diversification & reasonable non-combustibles exposure. New BAT32s which we had a screen cheap on has done poorly; 40bp loss on +19bps carry & -59bps spread return - latter saw secondary curve reprice wider.