Whitman Howard reiterates 'buy' on Imperial Tobacco

Regardless of whether the speculation swirling around a possible bid for Imperial Tobacco from British American Tobacco pans out or not, the organic story and valuation argument were “compelling enough”, Chris Whitman at Whitman Howard said in a research note sent to clients.

Whitman reiterated the recommendation he gave in another note on 11 November, “Imperial Tobacco shares should be bought and they should hit a £42 (4200p) share price in 2016 – i.e. investors who don’t hold should BUY and investors who do hold should BUY more shares.”

Among the drivers for the share price, he pointed out the fact that the brand’s rejuvenation was ongoing, cost-cutting had more momentum, Imperial Tobacco was better equipped than others to operate across a range of nicotine delivery processes, and senior management was highly competent.

In particular, the broker pointed out the cash-generative nature of the fast moving consumer goods space (FMCG).