Jardine Matheson - CGS-CIMB Research 2020-03-09: FY19 In Line With Expectations

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JARDINE MATHESON HLDGS LTD (SGX:J36)

Jardine Matheson - FY19 In Line With Expectations

• Jardine Matheson's FY19 underlying net profit formed 97% of our forecast, within expectations.
• The group expects the short-term outlook to be challenging given the Covid-19 outbreak.
• We downgrade our rating from Add to HOLD.

FY19 in line with expectations

• Jardine Matheson (SGX:J36)'s FY19 underlying net profit of US$1.5bn was in line with our expectations, at 97% of our forecast. A final DPS of US$1.28 was declared.
• In FY19, Jardine Matheson’s balance sheet was strengthened by a cash inflow of US$2.1bn arising from the sale of its stake in Jardine Lloyd Thompson.

PT Astra International (29% of FY19 underlying net profit)

• Key drivers behind Astra’s performance were
  1. lower car sales and higher operating costs;
  2. reduction in non-performing loans; and
  3. contribution from a new gold mining operation.

Dairy Farm Int’l Hldgs (29% of FY19 underlying net profit)

• Dairy Farm (SGX:D01)’s FY19 revenue fell 5% y-o-y while its underlying net profit fell 10% y-o-y due to the impact of the social unrest in Hong Kong, whose impact was felt most by its Mannings unit.
• See report: Dairy Farm International - CGS-CIMB Research 2020-03-06: Still Cold Up North.
• See Dairy Farm Share Price; Dairy Farm Target Price; Dairy Farm Analyst Reports; Dairy Farm Dividend History; Dairy Farm Announcements; Dairy Farm Latest News.

Hongkong Land Hldgs (13% of FY19 underlying net profit)

• Hongkong Land (SGX:H78) did well with underlying profit growth of 4% y-o-y. The group’s investment properties business maintained stable profits while the development properties business benefitted from higher contribution from the Chinese mainland property market. Hongkong Land expects its net debt to rise in FY20F as payments are made for committed land purchases.
• See report: HongKong Land - CGS-CIMB Research 2020-03-06: Resilient Office, Stable Dividends.
• See also Hongkong Land Share Price; Hongkong Land Target Price; Hongkong Land Analyst Reports; Hongkong Land Dividend History; Hongkong Land Announcements; Hongkong Land Latest News.

FY20F outlook

• Jardine Matheson (SGX:J36) expects the short-term outlook to be challenging and its performance in FY20F will depend on the duration, geographic extent and impact of the Covid-19 outbreak and the measures taken to control the outbreak. The group is optimistic about the prospects for a speedy recovery once the situation stabilises.

Downgrade from Add to Hold

• Our earnings cuts reflect the downward revisions for its operating subsidiaries given the current uncertainties from the Covid-19 outbreak.
• Our Target Price falls to US$52.53 (still based on 0.78x FY20F P/BV which is 0.5 s.d. below its historical 20-year average P/BV).
• See Jardine Matheson Share Price; Jardine Matheson Target Price; Jardine Matheson Analyst Reports; Jardine Matheson Dividend History; Jardine Matheson Announcements; Jardine Matheson Latest News.
• Key upside/downside risks are economic conditions in Greater China and Southeast Asia.

William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-03-09

SGX Stock Analyst Report HOLD DOWNGRADE ADD 52.53 DOWN 61.660