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
25.80
Down
34.50
