Company Name: JARDINE CYCLE & CARRIAGE LTD
| Research House: JP Morgan Chase | Price Call: HOLD | Target Price: 53.00 |
JPMorgan initiates Jardine Cycle & Carriage at Neutral with $53 target. “We see JC&C as an attractive option for investors looking for exposure to Astra,” it says, noting its 22% P/E discount to 50.1%-owned ASII vs the five-year average of 13%.
“We think this is an opportunity, and expect the discount to narrow, driving JC&C outperformance,” it says; it expects the P/E discount to narrow to 8%-10%. “We see the weaker rupiah environment supportive of JC&C delivering better USD returns than Astra in the near term. Longer term, potential buybacks at JC&C mean that EPS growth (30.6% p.a. over the last five years) should outpace Astra (28.5%).”
JPMorgan says its muted outlooks on ASII, 80%-owned Astra Agro and 60%-owned United Tractors keep it from giving JC&C an Overweight rating. JPMorgan notes risks from JC&C’s lower liquidity, as it’s 71.27%-owned by Jardine Strategic; “while a declining free float may support stock performance, we note that it could also limit investors’ ability to trade JC&C.” It also notes the Singapore market’s car-sales prospects offer relatively limited growth. JC&C is up 1.0% at $49.10.
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