Jardine Cycle & Carriage: Slowdown across key businesses

1Q09 net profit fell 31% YoY to US$88.2m, in line with our forecasts.Revenue declined 23% YoY, as key business segments reported a slowdown.Business activity across all its business segments are expected to be weak,as the global economic recession continues, and we expect FY09 earnings tobe lower YoY. Slowing inflation in Indonesia and potential interest ratescuts could help to slow down the decline in automotive unit sales, but wedo not expect a growth in FY09 automotive unit sales, given the weakeningeconomy. Our target price of S$10.28 is a 22% downside from current price,and with FY09F dividend yield of 3.0%, the stock is not attractive. Wemaintain our SELL recommendation.

Lower CPO prices dragged down agribusiness earnings. During the quarter,CPO prices achieved fell 32% YoY, resulting in a 79% YoY drop in net profitcontribution from the agribusiness.

Weaker demand for automotives leads to lower profit contribution. Theweaker economy and soft commodity prices resulted in lower demand forautomotives, especially motorcycles. As a result, net profit contributionfrom automotives declined 28% YoY.

Increased coal mining activities helped boost profit contribution.There wasimproved profit contribution (+26% YoY) from the heavy equipment business,driven by increased mining.

Maintain earnings estimate of US$333.2m for FY09. We have a target price ofS$10.28, based on SOTP valuation. Maintain SELL.

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