SINGAPORE (Mar 10): 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.

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.

See: Jardine Matheson and Jardine Strategic post higher FY19 earnings on one-off gains

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.”

As at 3.39pm, shares in Jardine Matheson are trading US$1.62 lower, or down 3.2%, at a 52-week low of US$48.50.

The counter is trading 12.8% lower year-to-date, and some 27.8% below its recent peak of US$67.20 recorded in March last year.