Jardine Cycle & Carriage - DBS Vickers 2015-09-09: More downside risk.

JARDINE CYCLE & CARRIAGE LTD C07.SI 

More downside risk 

  • FY15/16 earnings forecasts cut by 12%/17% respectively on lower Astra contribution and expectations that the Rupiah will continue to weaken. 
  • Astra’s FY15/16 forecasts cut by 9%/8% after assumptions cut mainly for auto and United Tractors. 
  • While Astra is a Neutral call, there is more downside for JC&C on likelihood that Rupiah depreciates further. 
  • Downgrade to Fully Valued with TP of S$25.80, based on 20% holding company discount. 



Hit by weak Rupiah and tepid Astra earnings. 

  • YTD, the Rupiah has weakened by 14% against the US$ and with our most recent cut in earnings forecasts for Astra (-11% EPS growth in 2015F), coupled with dilution from the rights issue, we now project JC&C’s EPS to decline a massive 33% in 2015F. 
  • While earnings for Astra is projected to recover 9% in 2016F, it would be offset by further weakness in the Rupiah, and JC&C’s EPS is expected to slide a further 4% in 2016F. 

Further downside risk exists on IDR depreciation. 

  • Astra’s near term outlook, i.e. 2H15 remains challenging as Indonesia’s economy slows, and commodity prices remain low. This would translate into continued weak earnings performance for JC&C. 
  • Additionally, the Rupiah is expected to further weaken against the USD over the next 12 months, which would translate into a smaller earnings contribution from Astra and a lower value of its holdings in Astra. 

TP cut to S$25.80 on lower Astra TP and wider holding company discount. 

  • Our target price for JC&C is lowered to reflect the lower target price for Astra (from Rp6,600 to Rp5,550), a weaker Rupiah outlook, and a larger holding company discount of 20% vs 15% previously. 
  • We downgrade the stock to Fully Valued.

Paul YONG CFA | http://www.dbsvickers.com/ DBS Securities 2015-09-09
FULLY VALUED Downgrade HOLD 25.80 Down 34.50


Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......



ANALYSTS SAY


loading.......