BAT valuation 'attractive' and dividend looks safe to Piper Jaffray

Analysts at Piper Jaffray upgraded British American Tobacco from 'neutral' to 'overweight' on Tuesday, noting the industry giant's valuation appeared "attractive" at current levels.

While trimming its estimates on currency and more conservative US assumptions due to risks associated to with the FDA's ban on menthol cigarettes, Piper Jaffray maintained its £30 target on the firm, noting that much of the menthol related risks appeared priced in.

"While BAT has greater menthol exposure than its peers, risk from a potential ban already appears priced in."

Piper Jaffray's analysts do not expect any operational impact "for years and years", as the rule-making process itself is lengthy and likely to be followed by "5-10 or more" years of legal challenges.

While many investors have quailed at potential risks to dividend growth - the analysts do not see it, adding that BAT's cash flows appeared to be at no risk in any way that would impact its dividend.

"We have had questions from investors on risk to the dividend, reflecting concerns we do not share."

Piper Jaffray also noted that, while BAT's glo patent litigation in Japan was "still a risk", it conceded that it was perhaps less of one than it had initially believed.