Jardine Matheson - Hold : weak 3Q15 highlights valuation is not compelling


■ Interim management statement highlights 3Q15 y-o-y earnings decline, driven by Astra, Dairy Farm and currency

■ 3Q15 performance in line with HSBC’s forecast, which for 2015e is 5% below consensus

Maintain Hold at lower target price of USD55.5 (down from USD60)

Jardine Matheson (JM) profit down y-o-y in 3Q15
Today issued its Interim Management Statement for 3Q15. JM said that the difficult trading conditions experienced by many of the Group’s businesses in 1H15 continued into 3Q15 and as a result earnings were ‘somewhat’ below those recorded in 3Q14. In our JM recurring profit forecast for 2H15, we assume a 6% y-o-y decline. Therefore, in aggregate the performance appears to be in line with our forecast, which for 2015e is 5% below consensus.

Dairy Farm (DF) and Astra had lower y-o-y profit in 3Q15
In the statement, JM stated that while DF’s businesses in North Asia generally performed well, trading in Singapore, Malaysia and Indonesia continued to be soft, leading to an overall reduction in underlying earnings. Astra recently reported a 22% y-o-y decline in USD earnings in 3Q15. In contrast HK Land enjoyed positive rental reversions and steady occupancy in its HK office portfolio and its residential activities benefited from completions in mainland China and Singapore. Other businesses varied with Jardine Pacific and Mandarin Oriental relatively steady, JLT mixed and Jardine Motors down y-o-y. In this report, we factor in changes to business forecasts which in aggregate cause no change in our recurring net profit estimates for JM.


Jardine Matheson Technical Analysis
Daily Chart
Maintain Hold with new fair value TP of USD55.5 (from USD60)
We cut our appraised valuation to USD74 per share (from USD81) to reflect primarily a lower target price for Dairy Farm and reduced valuation of Jardine Motors. We continue to set our target price for JM at a 25% discount to our appraised valuation, giving us a lower TP of USD55.5 (from USD60). Our target price implies a 1% upside and we argue the valuation is not compelling at current levels. (Read Report)

Read Related Report
1) The Jardine Group - Subdued tone not unexpected by Macquarie Research, published on 5 November 2015

Source : HSBC Global Research

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