Jardine Cycle & Carriage

We initiate coverage on Jardine Cycle & Carriage (JCC) with a BUY recommendation and target price of S$49.88. JCC is a near 100% proxy for Jakarta-listed Astra International (Astra), with exposure to S.E. Asia’s automotive market. The Group owns 50.1% of Jakarta-listed Astra International (Astra), which contributes c.94% of the Group’s total underlying profit. We expect firm double-digit earnings growth in 2015 and 2016, driven by contribution from Astra. The stock also offers a decent dividend yield of c.3.5%.

Jardine C&C trades at an average discount of 19%

Background: Jardine Cycle & Carriage (JC&C) is an automotive conglomerate with an interest of just over 50% in Astra International. The latter is itself a large Indonesian conglomerate, whose core business activities span automotive, financial services, heavy equipment and mining. JC&C also has other motor interests in Singapore, Malaysia and Vietnam.

Why are we highlighting this stock? Investors have been pushing for more visibility on the stock, as it makes up a significant portion of the Straits Times Index. In addition, the recent 1:10 stock split of its subsidiary Astra International has given rise to the possibility of JC&C undergoing a stock split itself.

Our view
Trading at steep conglomerate discount. Jardine C&C trades at an average discount of 19% (Jan 2010 to-date) to its 50.1% holdings of Astra International, and this excludes its non-Astra businesses in Singapore, Malaysia, Indonesia and Vietnam.

Non-Astra businesses still profitable. JC&C’s non-Astra businesses in