The Malaysian cabinet decision to defer the ban on the sale of 14-stick cigarette packs, or small packs, to 2010 could be the much-needed boost to cigarette companies' sales, analysts said.

Mayban Research said the postponement of the ban, which was to be implemented in June 2006, would benefit cigarette giants like British American Tobacco and JT International, barring a large tax hike in the 2006 budget.
“BAT is expected to benefit more from the postponement as it has a larger exposure to small packs (32 per cent of total BAT volume) compared with JTI (about 8 per cent of total volume). This is due to BAT’s comparatively larger share of the premium segment through Dunhill (39.5 per cent market share),” it said.
Although the deferment of the ban is seen as a reprieve for the tobacco industry, higher taxes remain a concern for most analysts. Mayban Research noted that another round of significant tax hikes on tobacco products would raise cigarette prices and further dampen sales. “However, we expect only a moderate increase in tax on tobacco products since raising tobacco taxes (hence cigarette prices) significantly would lead to higher contraband sales. We have assumed an excise increase of 20 per cent in the 2006 budget, with industry sales volume remaining flat,” it said.
Another research house concurred, saying that there was “still every possibility of another excise duty hike in the upcoming budget, which could hurt future demand.” (pi)