JARDINE MATHESON HLDGS LTD (SGX:J36)
Jardine Matheson - Strong Balance Sheet To Weather Covid-19
- Jardine Matheson’s 1H20 underlying net profit was below expectations at 24% of our full-year estimate and 27% of consensus’s.
- The group expects the short-term outlook to be challenging given the COVID-19 outbreak but notes some signs of business recovery.
- Even so, we upgrade Jardine Matheson from Hold to ADD as some of the earnings uncertainty has been priced in.
Jardine Matheson's 1H20 underlying net profit below expectations.
- Jardine Matheson (SGX:J36)'s 1H20 underlying net profit came in below expectations at 24% of our full-year estimate and 27% of consensus’s. Underlying net profit fell 49% y-o-y to US$373m due to the impact of the COVID-19 pandemic.
- Factoring in the decrease in fair value of investment properties of US$1.2bn, Jardine Matheson reported a net loss of US$775m.
- The group maintained its interim DPS of US$0.44, flat y-o-y. See Jardine Matheson Dividend History.
- The three main contributors to underlying net profit were Hongkong Land (SGX:H78) (40%), Astra (29%) and Dairy Farm (SGX:D01) (18%). Mandarin Oriental (SGX:M04) reported a loss of US$67m.
- Net gearing at end-1H20 was 0.09x.
Hongkong Land
- Hongkong Land (SGX:H78)'s office portfolio in Hong Kong remained resilient with 5% vacancy at the end of 1H20 compared to 2.9% at the end of FY19. In Singapore, rental reversions remained positive in the group’s office portfolio in 1H20 and 1.5% vacancy at the end of 1H20 compared with 5% at the end of FY19.
- See report: HongKong Land - CGS-CIMB Research 2020-07-31: Resilient Portfolio.
Astra
- Excluding the gain on the disposal of its investment in Permata Bank, Astra’s net profit fell 44% y-o-y in Indonesian rupiah mainly due to significantly lower contributions from its automotive, financial services and heavy equipment and mining businesses.
Dairy Farm
- Dairy Farm (SGX:D01)'s sales fell 9% y-o-y while underlying profit was down 40% y-o-y. In Health and Beauty, performance in North Asia was materially affected by a continuing lack of overseas tourist customers in Hong Kong. The Southeast Asia business performed well in the first quarter but was subsequently impacted by social distancing measures.
- See report: Dairy Farm International - CGS-CIMB Research 2020-07-30: COVID-19 Strikes Harder Than Expected.
Upgrade Jardine Matheson from Hold to ADD
- Our FY20-22F earnings cuts reflect the downward revisions for its operating subsidiaries given the uncertainties from the COVID-19 outbreak. Our Target Price for Jardine Matheson falls to US$48.61 (still based on 0.78x FY20F P/BV which is 0.5 s.d. below its historical 20-year average P/BV).
- Given that some of the earnings uncertainty has been priced in, we upgrade Jardine Matheson from Hold to ADD.
- 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 COVID-19 impact on economic conditions in Greater China and Southeast Asia.
William TNG CFA
CGS-CIMB Research
|
https://www.cgs-cimb.com
2020-07-31
SGX Stock
Analyst Report
48.61
DOWN
52.530