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1、,68.00,63.50,2.0,9.1,PE,1.4,1.3,1.3,1.2,x,2.0,2.0,2.1,2.4,%,Company report,IndustrialsConglomeratesEquity Singapore,abcGlobal Research,Jardine Matheson(JM SP),NeutralTarget price(USD)Share price(USD)Forecast dividend yield(%)Potential return(%)Note:Potential return equals the percentagedifference be
2、tween the current share price andthe target price,plus the forecast dividend yieldDec 2011 a 2012 e 2013 eHSBC EPS 4.13 4.02 4.37,Downgrade to N:Slowing growth caps upside Growth slowing due to demand softening at Astra,weakerIDR and HACTLs loss of key customer Cathay Pacific HSBC forecasts lowered
3、and now 6-9%below consensus Downgrade to Neutral although target raised to USD68(fromUSD58);fully valued after recent outperformance,HSBC PEPerformance,15.41M,15.83M,14.512M,Absolute(%)Relative(%),2.81.5,3.3-2.1,22.14.7,Growth slowing.We estimate Jardine Mathesons(JM)recurring profit doubled in thef
4、ive years to 2012e.This track record was one of the key reasons why JM was our preferred,conglomerate for most of this period.However,half of JMs growth was driven by Astra,25 January 2013Mark Webb*Regional Head of Conglomerate andTransport ResearchThe Hongkong and Shanghai BankingCorporation Limite
5、d+852 2996.hkStephen Wan*AnalystThe Hongkong and Shanghai BankingCorporation Limited+852 2996.hkRohit Kadni*AssociateBangaloreView HSBC Global Research at:http:/*Employed by a non-US affiliate ofHSBC Securities(USA)Inc,and is notregistered/qualified pursuant to FINRAregulationsIssuer of report:The H
6、ongkong andShanghai Banking,and risks are now rising.We expect auto sales to slow in 1H13 due to softer demand andthe impact of new down payment rules for Islamic financing.In addition,we estimate30%of our fair value(primarily Astra)is denominated in IDR so the recent depreciationof this currency ex
7、acerbates these trends.Finally,Jardine Motors is suffering from a weakperformance in a difficult mainland market and Jardine Pacifics main profit driver,HACTL,will lose over 40%of business in 2013e as Cathay switches to its own terminal.Earnings lowered;HSBC forecasts below consensus.As a result of
8、a cut in our forecastcontributions to JM from Astra,Jardine Motors and Jardine Pacific,we lower our 2012-14e recurring net profit by 3-6%.We are 6%and 9%below consensus for 2012e and2013e,respectively,and forecast 2011-14e recurring profit will rise at a 7%CAGR.Downgrade to Neutral.We increase our a
9、ppraised valuation to USD91 from USD82 toreflect,primarily,recent share and target price increases at HK Land and Dairy Farm.Weset a new target price of USD68 based on a 25%discount to appraised valuation(downfrom 30%).This is lower than the 30%average discount since 2010 to reflect the re-ratingof
10、this stock over the period and brings the discount for JM in line with Swire Pacific andWharf.JM has risen 25%over the last year and has outperformed the MSCI AEJ index by9%.We argue the stock is now fully valued and downgrade to Neutral.Key financial summary,Corporation Limited,Ye Dec,EBIT Net prof
11、it HSBC NP,EPS HSBC EPS,PB,Div yield FCF yield,Disclaimer&DisclosuresThis report must be readwith the disclosures andthe analyst certifications inthe Disclosure appendix,and with the Disclaimer,which forms part of it,USDm USDm2011 3,909 3,4492012e 3,720 1,5762013e 3,961 1,6402014e 4,510 1,836Source:
12、Company data,HSBC estimatesIndexIndex levelRICBloombergSource:HSBC,USDm USD1,495 9.531,472 4.301,625 4.411,825 4.94Straits Times Index3,220JARD.SIJM SP,USD x4.13 15.44.02 15.84.37 14.54.91 12.9Enterprise value(USDm)Free float(%)Market cap(USDm)Source:HSBC,%-459764,4794742,581,Jardine Matheson(JM SP)
13、Conglomerates25 January 2013Financials&valuationFinancial statements,Valuation data,abc,Year to,12/2011a,12/2012e,12/2013e,12/2014e,Year to,12/2011a,12/2012e,12/2013e,12/2014e,Profit&loss summary(USDm),EV/sales,1.2,1.1,1.0,0.9,RevenueEBITDADepreciation&amortisationOperating profit/EBITNet interestPB
14、THSBC PBT,37,9674,823-9143,909-1239,4884,784,40,0854,700-9803,720-1344,9794,686,42,7835,069-1,1083,961-175,1485,148,47,7135,757-1,2474,510-25,7975,797,EV/EBITDAEV/ICPE*P/NAVFCF yield(%)Dividend yield(%)*Based on HSBC EPS(diluted),9.31.315.41.4-4.12.0,9.61.215.81.34.92.0,8.81.114.51.38.52.1,7.81.112.
15、91.26.72.4,Taxation,-873,-810,-846,-978,Net profitHSBC net profit,3,4491,495,1,5761,472,1,6401,625,1,8361,825,Price relative,Cash flow summary(USDm),69,69,Cash flow from operationsCapexCash flow from investmentDividendsChange in net debtFCF equity,4,868-7,162-6,868-8221,275-3,335,4,902-2,850-2,850-8
16、36-698906,4,931-1,709-1,709-891-1,5432,496,5,160-2,138-2,138-1,000-1,0632,639,6459544944,6459544944,Balance sheet summary(USDm)Intangible fixed assets 2,348Tangible fixed assets 29,100Current assets14,948Cash&others4,185Total assets58,297Operating liabilities7,655,2,53730,78116,1614,88361,8728,548,2
17、,70531,21418,3616,42665,1889,101,2,91531,89520,6247,48968,8929,691,392011Jardine MathesonSource:HSBCNote:price at close of 22 Jan 2013,2012 2013Rel to STRAITS TIMES INDEX,392014,Gross debtNet debtShareholders fundsInvested capital,10,0675,88216,35637,888,10,0675,18417,48239,380,10,0673,64118,64840,0
18、86,10,0672,57819,97338,255,Jardine Matheson NAVBusinessJardine Pacific*,USDm2,050,Per share5.7,%EV6%,Jardine Motors,1,061,2.9,3%,Ratio,growth and per share analysis,JLTDairy Farm,1,23310,885,3.430.1,4%33%,Year toY-o-y%changeRevenueEBITDAOperating profitPBTHSBC EPS,12/2011a26.316.215.39.98.7,12/2012e
19、5.6-2.5-4.8-47.5-2.7,12/2013e6.77.86.53.48.7,12/2014e11.513.613.912.612.3,HKLMOHAstra/otherOtherEquity valueShares outFair value per shareDiscountTarget(USD),7,1501,1468,4481,00032,9733629125%68,19.83.223.32.891,22%3%26%3%100%,Ratios(%),Source:HSBC,Revenue/IC(x)ROICROEROAEBITDA marginOperating profi
20、t marginEBITDA/net interest(x)Net debt/equityNet debt/EBITDA(x)CF from operations/net debt,1.110.49.916.412.710.339.215.01.282.8,1.08.18.77.111.79.335.112.41.194.6,1.18.39.06.811.89.3292.28.10.7135.4,1.29.69.57.212.19.53013.55.40.4200.1,Per share data(USD),EPS reported(diluted)HSBC EPS(diluted)DPSNA
21、V,9.534.131.2545.18,4.304.021.2647.74,4.414.371.3350.16,4.944.911.5053.72,2,Jardine Matheson(JM SP)Conglomerates25 January 2013Slowing growth capsupside Growth slowing due to demand softening at Astra,weaker IDRand HACTLs loss of key customer Cathay Pacific HSBC forecasts lowered and now 6-9%below c
22、onsensus Downgrade to Neutral.Although target raised to USD68(fromUSD58),fully valued after recent outperformance,abc,Business outlookPrimarily due to a poor performance at JardineMotors and a depreciating IDR,the earningsoutlook for Jardine Matheson has weakened.1.Jardine Matheson 2012e recurring n
23、et profit,Jardine C TPIDR7,700)Auto risks risingJM has a 29%effective stake in AstraInternational(Astra)through its interest in JardineCycle&Carriage(JCNC).Astra makes up 37%of 2012e recurring profit and 26%of our,Astra37%,Pacific12%,Motors1%JLT5%HK Land19%,appraised equity valuation.As we highlight
24、ed in our recent report on Astra(Growth stalls as auto risks rise,14 January2013),we believe the risks to growth in the autodivision have risen.4W demand has softened,MOH3%Source:HSBC estimates,Dairy Farm23%,While Astras December wholesale car(4W)volumes rose c12%y-o-y,inventory picked upsubstantial
25、ly.Astras inventory days doubledfrom October to November and Astra said excess,As a result,we have lowered our 2012-14erecurring net profit forecasts by 3-6%and ourrevised estimates are now 6%and 9%belowconsensus in 2012e and 2013e respectively.,stock for the whole industry caused discounting tojump
26、 at the end of December/early January.As aresult,we believe production levels were probablytemporarily lowered.While Astras inventory hasnow returned to normal,the year-end soft patchwas likely caused by demand weakening in areasreliant on commodities,seasonality,and finallygeneral inflation cutting
27、 consumer purchasing,3,Jardine Matheson(JM SP)Conglomerates25 January 2013power.The low-cost green car sales couldultimately boost volumes by c20%(and sales byabout half that amount).However,the launch isbeing delayed until regulations are in place andproduction will only gradually be ramped up toth
28、e annual target of 110,000 units.Motorcycles likely to suffer as Sharia financerules brought into line with non-Islamic financeMotorcycle sales are likely to suffer from Januaryas the Sharia finance down-payment exemptionhas been removed.As Sharia finance in 2H12 didnot require minimum down payments
29、,itaccounted for 60%of new 2W finance bookingsin this period(up from under 10%before theconsumer finance minimum down-payment ruleswere introduced last June).Indeed,on average,Astra finance companies required a 7.5%downpayment on Sharia-financed 2Ws compared to theminimum down payment required on no
30、rmal autoloans of 20%.However,from January 2013,non-bank auto finance companies will have to have thesame 20%down payment for Sharia financing asfor non-Islamic financing and this creates a clearnear-term risk to 2W sales due to the highproportion(c80%)purchased using credit.United Tractors(UNTR IJ,
31、N,TPIDR20,000)Facing headwindsKomatsus heavy equipment sales have comeunder pressure from a sharp fall in demand fromits most important market the mining sector and severe competition in other segments fromlocal as well as international brands.UTs heavyequipment sales have declined significantly in
32、thelast four months and preliminary figures indicatesales of c200 units(down 67%y-o-y)in December2012,the lowest level in more than three years.The environment remains challenging for UT ascuts in miners production plans are loweringsales of heavy equipment.As a result,we forecastKomatsus sales volu
33、me to decline by 3%y-o-y in2013.While the related services business is still4,doing well,the growth rate in 2013 is likely to bebelow the estimated 2012 rate due to the drop inin heavy equipment sales volumes.PAMAs 2013 coal production should be in linewith the mining industry.PAMA is cutting thestr
34、ip ratio by targeting easier to mine coal in orderto maintain reasonable margin levels.We assumecoal extraction will decline by 3%y-o-y and aforecast strip ratio of 8.5x in 2013,down from9.2x in 2012.We maintain our gross profit marginforecasts of 15-16%for 2012-13.We base our coal price assumption
35、on a currentNewcastle thermal coal price of about USD90/t,which gives an average Indonesian coal price ofUSD78/t for 2013,set at an 87%of thebenchmark thermal coal price forecast,forPAMAs customers.We forecasts recurring net profit growth of 2%in2012 and 6%in 2013(see our United Tractors noteDowngra
36、de to N:Coal price risk priced in,butupside potential limited,dated 14 December 2012).Our earnings forecasts downgraded for AstraWe have recently cut our auto forecasts and ourearnings estimates for United Tractors.As aresult,we reduce our 2013-14 EPS estimates by 3-4%.We now expect 2013 EPS to rise
37、 only 3%and we are 8%below consensus.The impact onJM will be exacerbated by the 7%IDR depreciationversus the USD over the past year.The net impactis that we have lowered the forecast contributionto JM from JCNC/Astra by 6-15%over theforecast period.Dairy Farm(DFI SP;N;TP USD12.7)JM has a 63%effectiv
38、e interest in Dairy Farm(DF).DF makes up 23%of 2013e recurring profitand 33%of our appraised equity valuation.Outlook remains robustWe expect a strong performance across businesssegments in 2013e led by an economic recovery,abc,HACTL,14%,Jardine Matheson(JM SP)Conglomerates25 January 2013in Asia.We
39、expect retail sales in Dairy Farmsmain markets to be strong in 2013e.HSBCforecasts Hong Kong,Indonesia and mainlandChina retail sales will grow over 15%y-o-y.Weexpect the other main profit growth drivers will beaccelerated store openings,the full impact fromacquisitions in Cambodia and Philippines,a
40、turnaround in convenience store operations inChina and continued growth in health and beauty.We expect IDR depreciation will largely offset thepositive impact of the appreciation of Asiancurrencies.We raise our 2013-14e forecasts by,Jardine Pacific outlook mixedJardine Pacific is a wholly-owned subs
41、idiary ofJM,and makes up 12%of 2012e recurring profitand 6%of our appraised equity valuation.2.Jardine Pacific 2012e net profit breakdownOthers7%Restaur28%Schindler18%,abc,1%mainly due to the net positive currency impactand we now expect HSBC net profit will grow18%y-o-y in 2013e.Our forecast assume
42、s a 1%,Gammon14%,JEC19%,positive impact on 2013e net profit from currencymovements.We are 1-3%above consensus for2013-14e.Trading at top end of PE trading rangeDFs shares have risen 14%y-t-d,outperformingthe index by 13%.DF is currently trading at a 27x2013e consensus PE which is above its long-term
43、average of 21x and just below the five-year peakof 28x.While we believe DFs market leadingposition and pan-Asia focus provide valuationsupport,we see limited upside from current levels.Hongkong LandHKL SP;OW current share price USD7.6JM has a 40%effective interest in Hongkong Land(HKL).HKL makes up
44、19%of 2012e recurringprofit and 22%of our appraised equity valuation.In its interim statement,JM noted that HKLscommercial properties saw generally positiverental reversions in the period to early Novemberand that the contributions from residentialdevelopments sales were better than anticipated atth
45、e start of the year.,Source:HSBC estimatesJardine Pacific is a mini-conglomerate with mainprofit contributors being HACTL(Hong KongInternational Airports largest cargo handler),Jardine Engineering Corporation(JEC),JardineSchindler(lift installation and maintenance),construction company Gammon and it
46、srestaurant business.These businesses tend to be relatively morecyclical and there is often little visibility toearnings.In particular Gammon books profitsbased on the timing of the completion of projectsand this is difficult to predict.After slightlydisappointing 1H12 results,JMs interimstatement i
47、ndicated a continued mix performancefor the businesses within Jardine Pacific.We believe risks to earnings will continue in2013e.Cathay Pacific Group represents about40%of the volumes at HACTL and the airline hasrecently opened its own air cargo terminal at HKInternational Airport.While this new ter
48、minal willtake about six months to ramp up,by 4Q13 all ofCathays business will probably have beentransferred over to its own terminal.We estimatethis loss of earnings will offset growth elsewherewithin Jardine Pacific and as a result there will beno net profit growth in 2013e.,5,USDm,%,Jardine Mathe
49、son(JM SP)Conglomerates25 January 20133.Changes to HSBC recurring net profit forecasts,abc,_ New _2012e 2013e 2014e,_ Old _2012e 2013e 2014e,_ Change_2012e 2013e 2014e,Jardine PacificJardine MotorsJLTHK LandDairy FarmMOHJardine C&C(incl Astra)Recurring NP,1741173287337385521,472,1762280357397505441,
50、625,1863585362455686341,825,1821473286336385851,514,1852680356393506201,709,1953985359450687441,940,-4%-24%0%0%0%1%-6%-3%,-5%-17%-1%0%1%-1%-12%-5%,-4%-9%0%1%1%0%-15%-6%,Source:HSBC estimates,As a result of comments made in the interimstatement plus weak volumes at HACTL,we havelowered our estimates
