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Morgan Stanley is keeping a neutral rating on U.S. tobacco, but has an eye on these bearish developments:Five issues we are focused on are: 1) US domestic tobacco stocks currently trade at ~12.7x 2011 EPS and at ~9.5x 2011 estimated EV/EBITDA, toward the higher end of the historical valuation range. 2) Although the US dollar has strengthened, we believe US domestic tobacco manufacturers are fully/richly valued vs. the international peers. 3) Although perhaps not during 2011, the rate of US cigarette consumption decline, in our view, has clearly accelerated over the intermediate- to longer-term, principally driven by changing smoker demographics and lower average per capita consumption. 4) Marlboro’s US demographics are ageing. 5) Trial is currently underway in a statewide Lights class action (Larsen), and the FDA’s peer-reviewed preliminary analysis of the available menthol science will likely be released in November.