CGS-CIMB Research analyst William Tng has downgraded Jardine Matheson Holdings to “hold” as he believes recovery is likely to be slow and long.
He has, however, upped the group’s target price to US$54.68 ($73.21) from US$48.61 previously. The revised target price is based on 0.85x FY2020 book value per share (BVPS) compared to 0.78x FY2020F p/bv, he says.
In its 3QFY2020 business update on Nov 5, Jardine Matheson guided that there was an improvement in performance across many of its business compared to 2QFY2020, but underlying net profit for the quarter was down y-o-y.
The group also guided that it expects its 4QFY2020 performance to remain weak, mainly due to the impact of Covid-19 and the reduction of government support in the same quarter.
On Hongkong Land, Tng’s Hong Kong counterpart Raymond Cheng has reiterated his “add” call in view of the company’s “resilient” investment property portfolio coupled with an attractive valuation of 60% to net asset value (NAV).
Hongkong Land’s HK Central office portfolio has continued to register positive rental reversion in 1HFY2020 despite rising vacancies, Cheng noted.
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For Dairy Farm International, Tng’s colleague Cezzane See estimated that sentiment for the stock is “likely to improve”, allowing it to trade at at least a level of -1 standard deviation (s.d.) despite uncertainty in its medium-term prospects.
See recently upgraded her call on Dairy Farm to “add” with a lower target price of US$4.50 on an unchanged 20x FY2021F p/e.
Jardine Cycle & Carriage’s performance continues to be affected by “challenging” trading conditions caused by weak business and consumer sentiment, says Tng, although it saw improvement in a few of its businesses q-o-q.
The company’s key contributor Astra registered better business performance q-o-q, while the rest of its business segments remained “under pressure”.
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On this, Tng believes most of the bad news have been priced in, and that Jardine Matheson could re-rate back to 0.85x p/bv.
“Key upside/downside risks remain Covid-19 impact on economic conditions in Greater China and Southeast Asia as well as US-China tensions,” he says.
Shares in Jardine Matheson closed at US$54.06 while shares in Jardine C&C closed $19.75. Shares in Dairy Farm closed US$4.04 while shares in Hongkong Land closed US$4.23.
