Credit Suisse cuts Jardine Matheson, Jardine Strategic to Neutral

Stock Name: JSH 500US$
Company Name: JARDINE STRATEGIC HLDGS LTD

Research House: Credit Suisse

Price Call: HOLD

Target Price: 42.00

Stock Name: JMH 400US$
Company Name: JARDINE MATHESON HLDGS LTD

Research House: Credit Suisse

Price Call: BUY

Target Price: 72.00

Credit Suisse downgrades both Jardine Matheson (J36.SG) and Jardine Strategic (J37.SG) to Neutral from Outperform as it believes “near-term positives have been priced in, and there is limited scope for a further narrowing of discount to NAV.”

It notes JM and JS currently trade at NAV discounts of 16% and 27%, respectively, close to historical lows. Following the Interim Management Statement, the house reduces its 2013-14E EPS for JM/JS by 4%, mainly through lower estimates for its key subsidiaries Astra International (ASII.JK), Dairy Farm (D01.SG) and Jardine Pacific.

It notes mixed trading across key subsidiaries, with Astra’s 1Q13 results achieving 20% of FY13 consensus forecast, Dairy Farm’s earnings marginally lower on year due to weakness in Malaysia, and the vacancy rate for HongKong Land’s (H78.SG) central portfolio at 6.3%, up from 3.4% in December 2012.

The house cuts JM’s target price to US$72 from US$74, and JS’s target price to US$42 from US$43, as it sees “limited further upside given the strong share price performance since October 2012.” JM is flat at US$67.62. JS is up 0.3% at US$40.79.

JPMorgan starts Jardine Matheson at Overweight

Stock Name: JSH 500US$
Company Name: JARDINE STRATEGIC HLDGS LTD

Research House: JP Morgan Chase

Price Call: BUY

Target Price: 67.00

JPMorgan initiates Jardine Matheson at Overweight with a US$67.00 target, tipping an attractive opportunity. “We see JM as a diversified high-quality portfolio of operating businesses offering quality exposure to growth in Asean and Greater China. JM has grown earnings at 23% annually since FY05, raised dividends by 15% p.a., and improved ROCE over the last decade.”

It adds, JM trades at 11x FY13 P/E, a discount to all its major operating subsidiaries; “Given its operating earnings streams, and a healthy growth profile, we think this is unjustified and an opportunity for investors.”

It sees JM’s strong earnings delivery as a key attraction. It prefers JM to Jardine Strategic (J37.SG) for its consistently higher dividend, forecasting JM’s dividend to grow by 10% p.a. over the next three years. It notes JM’s earnings mix is interesting at 40% from Indonesia, but only about 33% in IDR, and 33% from Hong Kong, with the emerging and developed market split about 50:50.

JM is trading at US$60.00.

JSH 500US$ - Jardine Matheson, Strategic started at Neutral by JPMorgan

Stock Name: JSH 500US$
Company Name: JARDINE STRATEGIC HLDGS LTD
Research House: JP Morgan Chase

JPMorgan starts Jardine Matheson (J36.SG), Jardine Strategic (J37.SG) at Neutral with respective US$45.80 ($61.98), US$23.65 target prices, according to Dow Jones.



JPMorgan says both stocks trading near historical averages, but still deemed as cheaper alternatives to directly investing in their more expensive subsidiaries, such as Dairy Farm (D01.SG), Hongkong Land (H78.SG), Astra International (ASII.JK).

Research house prefers Matheson over Strategic given its better trading liquidity, higher dividend yield. Says most core businesses of Matheson, 53%-owned by Strategic, should benefit from Asia’s solid domestic demand this year, but earnings growth likely to slow in 2011-2012 given expected cyclical peak in Astra’s vehicle sales, fewer development property bookings for Hongkong Land.



Matheson off 0.1% at US$43.34, Strategic off 0.5% at US$24.76. STI +0.7%.

JSH 500US$ - Jardine Matheson, Strategic started at Neutral by JPMorgan

Stock Name: JSH 500US$
Company Name: JARDINE STRATEGIC HLDGS LTD
Research House: JP Morgan Chase

JPMorgan starts Jardine Matheson (J36.SG), Jardine Strategic (J37.SG) at Neutral with respective US$45.80 ($61.98), US$23.65 target prices, according to Dow Jones.



JPMorgan says both stocks trading near historical averages, but still deemed as cheaper alternatives to directly investing in their more expensive subsidiaries, such as Dairy Farm (D01.SG), Hongkong Land (H78.SG), Astra International (ASII.JK).

Research house prefers Matheson over Strategic given its better trading liquidity, higher dividend yield. Says most core businesses of Matheson, 53%-owned by Strategic, should benefit from Asia’s solid domestic demand this year, but earnings growth likely to slow in 2011-2012 given expected cyclical peak in Astra’s vehicle sales, fewer development property bookings for Hongkong Land.



Matheson off 0.1% at US$43.34, Strategic off 0.5% at US$24.76. STI +0.7%.

JSH 500US$ - Jardine Strategic cut to Hold from Buy by Citigroup

Stock Name: JSH 500US$
Company Name: JARDINE STRATEGIC HLDGS LTD
Research House: Citigroup

Citigroup has cut conglomerate Jardine Strategic (J37.SG) to Hold from Buy on expected earnings growth slowdown due to tougher on-year comparisons ahead, according to Dow Jones.



Citi notes Jardine Strategic’s 66% growth in 1H underlying profit “not surprising” given 1H09 one of weakest six-month periods in group’s recent history. In particular, expects Hongkong Land (H78.SG) business to “see negative rental reversions” in 2H10, 1H11.

But adds, not cutting rating to Sell due to stock’s 39% NAV discount. Raises target price to US$26.00 ($35.07) from US$20.00 on “operational improvement” seen “across the board,” increases FY10-12 EPS forecasts by 10.1%, 11.5%, 13.7%.



Research house notes JC&C (J37.SG) division star performer of group as stronger IDR boosted Astra (ASII.JK) earnings. Also downgrades parent company Jardine Matheson Holdings (J36.SG) to Sell from Hold for similar reasons, raises Jardine Matheson target to US$37.40 from US$32.00.



Jardine Strategic stock last down 0.2% at US$24.24, Jardine Matheson last down 1% at $41.20.