Jardine Matheson Holdings

Price targets:
US$52.53 DOWNGRADE HOLD (CGS-CIMB Research)
US$56.00 NEUTRAL (Credit Suisse Research)
US$57.00 NEUTRAL (Goldman Sachs Research)

CGS-CIMB Research has slashed its target price for Jardine Matheson Holdings (JMH) by 14.8% to US$52.53, and downgraded the counter to “hold”, from “add” previously.

This comes as the research house cut JMH’s earnings forecasts for FY2020 and FY2021.

Underlying net profit forecast for FY2020 ending December was revised downwards by 13% to US$1.57 billion, while underlying net profit for FY2021 is now expected to come in at US$1.66 billion — some 14% lower than expected earlier.

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Revenue estimates for FY2020 and FY2021 have also been cut by 5% and 7%, respectively.

“Our earnings cuts reflect the downward revisions for its operating subsidiaries given the current uncertainties from the Covid-19 outbreak,” says analyst William Tng in a March 9 report.

For FY2019, JHM reported higher earnings on the back of one-off gains, even as underlying net profit fell on lower revenue.

JMH saw its earnings jump 65% to US$2.84 billion ($3.95 billion), mainly due to net gains from the disposal of the group’s interest in Jardine Lloyd Thompson, as well as revaluation gain on other investments.

Stripping off the one-off gains, underlying earnings for JMH would have been 4% lower at US$1.59 billion, in tandem with a 4% fall in revenue to US$40.92 billion.

Jardine Group’s PT Astra International, which accounted for 29% of FY2019 underlying net profit, was troubled by lower car sales and higher operating costs during the year.

However, this was partially mitigated by a reduction in non-performing loans and contribution from a new gold mining operation.

Meanwhile, Hongkong Land Holdings saw a steady underlying profit growth of 4%, as its investment properties business maintained stable profits while the development properties business benefitted from higher contribution from the Chinese mainland property market.

On the other hand, Dairy Farm International Holdings saw its earnings rocked by the impact of the social unrest in Hong Kong. The group’s FY2019 underlying net profit fell 10% on the back of a 5% drop in revenue.

“The group expects the short-term outlook to be challenging given the Covid-19 outbreak,” Tng says. “[However,] the group is optimistic about the prospects for a speedy recovery once the situation stabilises.” — By Stanislaus Jude Chan 

Keppel Corporation

Price targets:
$7.60 BUY (RHB Group Research)
$7.35 OUTPERFORM (Credit Suisse Research)
$7.50 BUY (DBS Group Research)
$7.74 BUY (Goldman Sachs Research)
$7.75 BUY (UOB Kay Hian Research)
$7.80 BUY (HSBC Global Research)
$7.76 ADD (CGS-CIMB Research)

RHB Group Research has slashed Keppel Corp’s earnings forecast for FY2020 ending December by 13%, as the recent oil price collapse threatens to crush the conglomerate’s offshore and marine (O&M) forward order book.

However, the brokerage is keeping its “buy” call on Keppel Corp, albeit with a slightly lower target price of $7.60, down from $7.80 previously.

The lower earnings forecast comes after talks at a recent OPEC meeting collapsed as Russia refused to agree to what would have been the deepest supply cuts seen since the 2008 financial crisis.

Saudi Arabia, the world’s largest oil exporter, then slashed prices for its crude by the most in more than 30 years, triggering a price war that saw prices for the international benchmark Brent crude plunge in the biggest fall since 1991.

“If sustained at a low price, this could adversely affect Keppel’s offshore and marine forward order book,” warns analyst Leng Seng Choon in a March 10 report.

However, on the plus side, he notes that Keppel Corp recorded a net O&M orderbook of $4.4 billion for December 2019 — higher than the $4.3 billion in December 2018.

In addition, the analyst believes higher earnings from Keppel Corp’s property division should support dividends in the meantime.

“Its property arm is valued at a 40% discount to revalued net asset value (RNAV) — close to the average discount to RNAV applied for China-listed property developers,” says Leng.

“Property, which is less affected by the crude oil price slump, accounts for 42% share of Keppel’s RNAV, and should help support its share price,” he adds.

Meanwhile, Leng admits to awaiting further newsflow regarding Temasek’s partial offer to acquire an additional 30.55% stake in Keppel for $7.35 per share.

“The announcement was made in October 2019, and Temasek can only make the offer after the pre-conditions — including domestic and foreign regulatory approvals — are fulfilled or waived,” Leng explains. “If Temasek is successful in raising its stake to 51%, the subsequent strategic review could lead to more value created for shareholders.”

However, he cautions: “If the current global fears escalate further, we will review our forecasts and target price for Keppel again.” — By Stanislaus Jude Chan

Cache Logistics Trust

Price targets:
74 cents BUY (RHB Group Research)
75 cents HOLD (DBS Group Research)
73 cents HOLD (CGS-CIMB Research)
80 cents BUY (Maybank Kim Eng Research)

Near-term uncertainties are aplenty for the logistics sector, but analysts are choosing to remain optimistic about the longer-term potential in certain stocks.

RHB Group Research has identified Cache Logistics Trust as one such counter that investors should take note of.

In a March 10 report, RHB Group Research analyst Vijay Natarajan recalls Cache’s decision to enter into a strategic transaction with logistics property group Logos to establish a logistics real estate platform in the Asia-Pacific region.

As part of the deal, ARA Asset Management — which manages Cache — will transfer its entire holdings in both Cache and ARA Trust Management (Cache) to Logos.

This move, according to Natarajan, is set to help Cache tide over the near term difficulties.

“The entry of Logos as Cache’s new manager and major shareholder provides much needed ammunition in terms of strengthening its operational capabilities and growth potential,” adds Natarajan.

In addition, he adds that Cache is slated to reap the profits of the transaction in terms of a healthy acquisition pipeline, which has been tough to find amid tight capital market conditions and synergistic operational capabilities.

“[This] should result in some cost savings and an enhanced regional network,” says Natarajan.

Natarajan expects Cache to be aggressive in terms of asset acquisitions in the medium-term.

Singapore currently accounts for some 68% of the REIT’s portfolio, with Australia constituting the rest.

“Management has been reiterating its interest for acquisitions in overseas markets due to the freehold nature of assets,” observes Natarajan.

“With Logos becoming its sponsor, we believe Cache could potentially look at acquiring its Australia and New Zealand assets and also enter into new markets like South Korea and Vietnam at an opportune time,” he adds. — By Uma Devi